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PepsiCo (NASDAQ: PEP) is an international food, snack, and beverage company with headquarters in New York. It is one of the most recognizable brands in the world. The stock has held steady in 2022 so far, not a mean feat considering the bloodbath in the markets.
Despite the rising inflation levels, economic slowdowns, and the continuously rising interest rates by the Fed, the company has lost only around 1.8% year-to-date, while most growth stocks are well under the pump.
PepsiCo’s stable business processes, decent pricing policies, sustained profitability amid rising overhead costs, and steadily increasing dividend payouts over the years have attracted a lot of investor attention. Even though a potential recession is on the way, Wall Street, in general, is quite optimistic about PepsiCo stock’s performance.
Pepsi is a global brand
The last few quarters have seen demand for consumer products to fall. However, Pepsi has not been affected by any of these instances. Instead, as there is no shortage in demand for the company’s products, Pepsi has been able to experience strong organic growth in its operations.
All this has been possible because of Pepsi’s excellent pricing strategies. The owner of brands such as Gatorade, Pepsi, Quaker Oats, and Lay's, the company has consistently outperformed its peers. Besides, its efficient supply chain strategies and the steady stream of product innovations have helped it to maintain its profitability and position even at times when the shoppers had to tighten their wallets.
If the same situation continues, then Pepsi might be able to grab even a bigger market share in this competitive industry.
Pepsi’s improving financials
The Russia-Ukraine war and associated logistics issues had negatively impacted the first quarter financials of many growth-oriented organizations previously. However, PepsiCo has always been consistent with its strong bottom and top-line results, very often exceeding the expectations of the market. It has beaten the top line estimates of the market for 15 consecutive quarters since 2018.
Last year PepsiCo impressed the market by generating more than $89 billion in net revenue, with each of its brands generating more than $1 billion in estimated annual retail sales. In the first quarter of this year, despite all the abnormalities, the company witnessed net revenue growth of 9.3% along with organic revenue growth of 13.7%. The most notable growth, however, was in its EPS, which witnessed a massive 148% improvement compared to last year.
However, the stress in its margin levels because of Inflationary pressures and impacted supply chains have quite affected its recent second quarter financials. The net revenue growth of PepsiCo had declined to 5.2% for the quarter, while organic revenue growth of 13% was obtained. Besides, the EPS had also declined by 39% to $1.03 per share.
Now, as per the current levels, PepsiCo expects its full-year organic revenue to increase 10% from 8% and its core constant currency earnings per share to increase to 8%.
Pepsi offers a decent dividend
As major indices are performing poorly, investors are drawn toward stocks that can boost their income levels by paying out constant dividends. The best thing about PepsiCo is not only its paid dividends consistently but has also increased its annual dividends for around 50 consecutive years.
In the month of May itself, it declared a dividend of $1.15 per share, showing a 7% year-over-year increment. Its forward dividend yield stands at 2.71% right now. The high-profit margins of the company provide it with a sufficient buffer to keep up its dividend commitment.
The stock closed at $170.1, and the average consensus target for the stock is $184.77, a potential upside of 8.62%. PepsiCo is no doubt one of the top-performing stocks in the current market and thus can be a buy.
Pepsi has survived the harshest market conditions in the past owing to its excellent strategic decisions and is expected to continue doing so in the coming times as well. Also, if it is able to meet the market’s expectations in its recent quarterly report, then another rewarding situation might set in for the investors.
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