As PepsiCo Inc. shares were trading lower on Thursday after the release of its latest earnings, one analyst says the company’s outlook was disappointing, but maintained a buy rating on the stock.
PepsiCo shares fell just over four per cent during early afternoon trading Thursday, as the company lowered its full-year profit outlook amid unpredictable U.S. trade policy and declines in consumer sentiment, Bloomberg News reported.
The firm now expects 2025 earnings per share (EPS) to come in at around the same level as 2024, where an earlier outlook projected growth in the mid single digit percentage range. PepsiCo still expects a low-single digit increase in organic revenue.
“Pepsi results were somewhat disappointing particularly on the outlook I would say. They lowered the full year EPS outlook to flat…They cited tariffs, macroeconomic uncertainty, and a soft consumer backdrop as the reason for the guidance cut,” Filippo Falorni, the director of U.S. beverages, household products and personal care, and a lead analyst at Citi Research, said in an interview with BNN Bloomberg.
He said a cut to guidance was somewhat expected, but the size of the cut was larger than anticipated across its consumer staple group of products.
“From a consumer standpoint, the pressures, they remain more pronounced in North America particularly in the salty snack side of their business, the Frito-Lay business. And the beverage side remains a bit better, slight growth, one per cent growth in the quarter, but the snacking side was down two per cent organically, so that’s really the pressure that they continue to see in North America,” Falorni said.
U.S. Health and Human Services Secretary Robert F. Kennedy Jr. also released plans for the country to move away from petroleum-based synthetic food dyes, which would affect various products across PepsiCo’s operations, according to Bloomberg News.
Falorni said that while PepsiCo has pushed low or zero sugar options in its beverage segment, it will be impacted by the move away from dyes across the beverage and salty snack side of its business.
“Pepsi mentioned that for many of the brands, they have plans to remove the artificial dyes by the end of this year. So, they’re really moving in that direction towards the better for you part of the portfolio,” he said.
Falorni added the move away from dyes in the U.S. will impact the entire industry and larger companies are likely to fare better due to more advanced supply chains.
Despite the dimmer outlook for the company, Falorni said he still has a buy rating on the stock.
“We think at this level you’re somewhat protected on the downside from further big declines and the upside optionality it’s all there if really they’re able to turn around some of their businesses,” he said.
