PepsiCo cut 2026 profit guidance as United States snacks and drinks stalled. At $128.49 the 4.6% yield plus slow growth only tracks the market.
Key points
- $25.27 billion in third quarter sales grew 5.6% from a year ago, but only 3.1% was organic growth without deals and currency.
- 2% growth in third quarter core profit per share trailed sales as core profit margin fell 0.35 points on costs and marketing.
- $5.92 a share in yearly dividends pays a 4.6% yield that now carries most of the return while United States volumes stall.
The call
The market is about right to doubt a quick rebound. The shares trade at 15.3 times 2026 core profit per share, which is earnings without one-time items. That price needs about 3.5% yearly profit growth plus a 4.6% dividend yield to match the market.
Quarterly revenue now lifted by deals and currencySEC XBRL filings to Sep 2026. As of Oct 8 2026.
I expect slow growth to continue while North America is repaired. I see $103.54 billion in sales, up about 4% on the year. I see $8.68 in core profit per share, which is earnings without one-time items, up 3.5%.
Valuation
| Driver | Figure |
|---|
| 2026 core profit per share | $8.38 a share |
| 2027 sales | $103.54 billion |
| 2027 core profit per share | $8.68 a share |
| Multiple | 15.7 times earnings |
| Target in 12 months | $136.24 a share |
A staples leader with flat United States volumes deserves no premium to its 15.3 times today. At 15.7 times my 2027 estimate the upside is 6.0% plus the dividend. That total return only tracks the market, so a hold fits.
Bridge from $128.49 price to $136 targetAuthor estimates from Oct 8 guidance; FY27 core EPS $8.68 at 15.7 times. As of Oct 8 2026.
Risks
- United States snacks and soft drinks stay flat if value offers fail, seen in scanner volumes and share.
- Input costs rise faster as hedges, or locked prices, roll off, seen in gross margin falling below 54%.
- Cash is drained by the $8.9 billion payout and debt near $51.88 billion, seen in free cash flow conversion below 80%.
What would change my mind
A quarter of United States volume growth with margin expansion would prove the turnaround is working and support a higher multiple.