Pepsi (PEP) Stock Fundamental Valuation and Technical Analysis | Summary and Q&A

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July 12, 2022
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Pepsi (PEP) Stock Fundamental Valuation and Technical Analysis

TL;DR

Despite the broader market downturn and inflation concerns, Pepsi's Q3 earnings show strong revenue growth and guidance for organic revenue growth. However, there are potential challenges ahead.

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Key Insights

  • 🛀 Pepsi's Q3 revenues showed solid growth, outperforming expectations and indicating the company's resilience in a challenging market.
  • 💇 Inflation is a concern, but Pepsi plans to mitigate its impact through cost cuts and price increases, along with reducing product quantities.
  • ↩ī¸ The company is returning a significant amount of capital to shareholders through dividends and buybacks, showcasing its shareholder-friendly approach.
  • 😀 Pepsi's stock has shown a potential topping pattern, and it might face resistance around the $170 mark.
  • 🎚ī¸ Investors should consider potential pullbacks before accumulating Pepsi stock, with a cautionary level below $150 to protect against further declines.
  • đŸ’Ē Pepsi's strong balance sheet and ability to generate positive cash flows position it well for continued growth and dividend payments.
  • đŸŋī¸ The chip division of the company, Frito-Lay, has contributed significantly to operating profits, and its profitability is expected to increase due to consumer behavior during inflationary periods.

Transcript

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Questions & Answers

Q: How have Pepsi's stock prices performed compared to the broader market and speculative investments over the past year?

Pepsi's stock has gained 15% over the past year, while broader markets and speculative investments have experienced sell-offs.

Q: Is Pepsi concerned about inflation affecting their profits?

Pepsi's CFO mentioned that inflation could persist for years, but they plan to protect margins through cost cuts and price hikes.

Q: How did Pepsi's Q3 earnings compare to expectations?

Pepsi's Q3 revenues exceeded expectations by $720 million, and their earnings per share (EPS) beat expectations by 12 cents.

Q: What is Pepsi's guidance for organic revenue growth?

Pepsi expects a 10% organic revenue growth for the next two quarters, indicating positive growth prospects.

Summary & Key Takeaways

  • Pepsi's Q3 revenues increased by 5.3% and beat expectations by $720 million.

  • The company expects a strong organic revenue growth of 10% for the next two quarters.

  • Inflation is a concern, but Pepsi plans to combat it with cost cuts and price hikes. They have already reduced product quantities in packaging to protect margins.

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