2Q‘26 EPS Preview: Salty Beginnings, Sweet Ending?

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2Q‘26 EPS Preview: Salty Beginnings, Sweet Ending?

. We do not expect a *Rev. (MM)

notable change near-term. We est. 2% PBNA org. growth for 2Q, in line with Street. Charts 6-8

3. Lower spending is a theme across the business, not just within PBNA. Capex has contracted

to under 5% of sales LTM, and reinvestment dollars (net capex, marketing, R&D) as a percent of

after-tax profit fell to 60% in '25 - the lowest level in over a decade. This should translate to higher

earnings and returns (smaller asset base), but getting back to algo will be a debate. We maintain

our estimate for $8.55 EPS in '26 (5c below), at the low end of guidance. Charts 9-10

4. Execution uneven. Pepsi's promo strategy in '26 is to go wider (across more markets/SKUs)

with salty snack and beverage TDPs (total distribution points) on promo (e.g., either feature, display,

etc.) up ~19% and ~12%, respectively, YTD. However, both segments are still seeing dollar share

declines, calling into question whether promos are preventing a sharper slowdown. For now, promo

remains a cost rather than a catalyst. 2H trends will be telling. Charts 11-14

5. Estimates: Our numbers hardly move. For 2Q, we model 3.1% org. growth, driven by Int'l, 10bp of

margin expansion, and $2.21. EPS (in line). For '26, we est. 3% org. growth and $8.55 EPS (+5%).

6. Investment Thesis & Valuation: Turnaround story with the prospect of improving fundamentals

on innovation, promo, and efficiency measures. However, visibility into the consumer response is

low. Sentiment is likely to remain low until signs of better delivery emerge; downside is capped,

given the dividend yield (~4%) and Int'l strength. Our $162 PT is based on 17x our '28 EPS of $9.55.

Kaumil Gajrawala * | Equity Analyst

+1 (212) 778-8937 | kgajrawala@jefferies.com