PepsiCo (PEP.O): North America Challenges Lingering; Move to Neutral

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PepsiCo (PEP.O): North America Challenges Lingering; Move to Neutral

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10 Jul 2026 00:00:00 ET │ 21 pages

PepsiCo (PEP.O)

North America Challenges Lingering; Move to Neutral

CITI'S TAKE

We move to Neutral on PEP on continued weakness in N.America at PFNA &

PBNA, which have remained soft despite PEP’s strategic actions (price

reductions, innovation, shelf space gains). While Q2 near-term trends were Neutral ↓ from Buy

pressured by inflation impacts on consumer behaviors, especially in the c- Price (09 Jul 26 16:00) US$137.86

store channel, which could improve sequentially, we worry about lingering

underlying N.America weakness in H2/2027. PEP reiterated its 2026 Target price US$145.00↓

outlook, now pointing to the low-end of its +5-7% Y/Y EPS target, which from US$170.00

still implies a material Q4 N.America-driven reacceleration that we believe Expected share price return 5.2%could be challenging, even net of solid int’l results. We believe this dynamic

also creates carryover risk to numbers in 2027, when PEP will be cycling Expected dividend yield 4.3%

2026’s highly active innovation period, with still elevated cost inflation Expected total return 9.5%

pressuring margins. As such, we move to Neutral on PEP and lower our TP Market Cap US$188,423Mto $145 based on ~16.3x our 2027 $8.90 EPS estimate.

N.America Results Miss — While PEP delivered ~in-line total company 2Q’26 results,

with +2.4% OSG (vs. +2.6% cons) on int’l strength, North America results were softer

Price Performancethan expected, with PFNA OSG down -2% (vs. flat cons) and PBNA OSG +1% (vs.

+2% cons.). The N.America business is still working to build a sustained volume (RIC: PEP.O, BB: PEP US)

recovery, which is taking longer than initially anticipated. Mgmt indicated that the