PepsiCo (NYSE: PEP) will report its Q3 2023 results on Tuesday, Oct 10. We expect the company’s adjusted revenues to come in at $23.0 billion, slightly below the $23.4 billion consensus estimate. This would mark year-over-year growth of about 5%. Earnings are likely to come in at about $2.18 on a per-share and adjusted basis, slightly above the $2.15 consensus estimate. See our interactive dashboard analysis on PepsiCo Earnings Preview for more details on how the company’s revenues and earnings will likely trend for the quarter.
Interestingly, PEP has had a Sharpe Ratio of 0.4 since early 2017, which is lower than 0.5 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
PepsiCo will likely continue to benefit from steady demand and pricing gains. Looking at Q2 2023, PepsiCo’s revenues of $22.3 billion were up 13%, led by 15% pricing gains, partly offset by a 2% decline in volume. Sales growth was visible across its segments except Africa, the Middle East, and South Asia (AMESA). PepsiCo’s adjusted operating margin grew 44 bps to 17.3% in Q2. Our PepsiCo Operating Income Comparison dashboard has more details. The company reported earnings of $2.09 on a per-share and adjusted basis, compared to $1.86 in the prior-year quarter.
Looking at PepsiCo’s stock price, we believe that it has room for growth. We estimate PepsiCo’s valuation to be $199 per share, reflecting an 18% upside from the current levels. Our forecast is based on a 26x P/E multiple for PEP and expected earnings of $7.55 on a per-share and adjusted basis for the full year 2023. This compares with the last five-year average of 24x.
|S&P 500 Return||-1%||11%||90%|
|Trefis Reinforced Value Portfolio||-3%||20%||514%|
 Month-to-date and year-to-date as of 10/5/2023
 Cumulative total returns since the end of 2016