PepsiCo Inc. (PEP): In-line Q2 results but FY26 EPS growth now expected at low end of guidance range - We’re optimistic following mgmt meetings - Maintain Buy

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PepsiCo Inc. (PEP): In-line Q2 results but FY26 EPS growth now expected at low end of guidance range - We’re optimistic following mgmt meetings - Maintain Buy

avocado or olive oil; (b) The restaging of Gatorade -

including Gatorade Lower Sugar (launched in March), and Quaker - with an increased

focus on fiber for Quaker; and (c) An increased emphasis on protein (both food &

beverages), including a Doritos protein and Starbucks coffee & protein offering; (2) PEP

continues to implement sharper affordability initiatives at PFNA to improve

competitiveness and the purchase frequency of their brands - though mgmt is now

focused on optimizing the return on these investments by channel & customer. Along

these lines, we got the sense that mgmt may opt to ease their affordability initiatives in

the relatively higher-priced c-store channel, as these initiatives have yet to drive a

material improvement in volumes (in the channel). However, it sounds like PEP is leaning

into affordability initiatives in other channels - which in addition to stepped-up

innovation is expected to help drive +DD% shelf space gains for PEP this year - though

there are some channels where these shelf space gains are taking longer to execute than

originally anticipated (though still expected in 2H); (3) PEP is elevating & accelerating

their global productivity initiatives - through more automation, digitalization and

simplification initiatives - which in aggregate are expected to deliver record productivity

savings in 2026, benefiting in part from actions taken in 2H25; (4) PEP continues to

invest behind its brands - opting to reinvest some incremental tariff refunds back into its

businesses (vs flow through to the bottom line) - suggesting to us that the company is