PepsiCo cut 2026 earnings growth to 3 percent as U.S. drinks lag. International growth supports about $8.65 of 2027 earnings, which at 16 times lands near $138, a market-like return from $128.
Key points
- 3.1% organic revenue in Q3 2026, the fastest since late 2023, driven by 8% international organic growth.
- 1% to 2% core constant-currency EPS growth now guided for 2026, down from 4% to 6%, as hedges roll off.
- $8.65 of 2027 core EPS is my forecast; 16 times that number is $138, 7% above $128.49.
The call
The price at $128.49 asks for roughly $8.66 of 2027 earnings if the multiple stays 15 times, a defensive consumer staple discount. That is only 3% growth from the 2026 core run rate after the cut.
I believe international volume and a 21% tax rate can deliver $8.65 next year, but U.S. drinks and snack mix keep the multiple at 16 times, not 18. The stock should track the market plus the 4.5% dividend.
Revenue and operating profit ($ billions)SEC XBRL through Q3 2026; 2026E and 2027E are desk forecasts
Valuation
| Item | Figure |
|---|
| FY26 core EPS (desk) | $8.39 |
| FY27 core EPS (desk) | $8.65 |
| Multiple | 16 times |
| 12-month target | $138 |
| Dividend, last 12 months | $5.81 (4.5%) |
| Implied total return | about 12% |
Sixteen times is a staple multiple when U.S. volume is still repairing and operating margin is 17%. Upside is the dividend plus a modest re-rate if North America volume holds; downside is a 14 times multiple if snacks pricing fails. That mix is a hold, not a buy.
Core EPS history and desk forecastsCompany core EPS from earnings prints; FY26E-FY27E desk
Risks
- Input costs after hedges expire could cut 2027 EPS below $8.20.
- U.S. carbonated drinks volume could stay negative even after extra marketing.
- A broader distribution overhaul could add one-time costs without faster sales.
What would change my mind
A February 2027 outlook that puts 2027 core EPS above $9.00 with stable North America margins would support a higher multiple.