PepsiCo Grapples With Soaring Debt, Negative Cash Flow: 'Nice Activist' Isn't Enough, Says GimmeCredit - PepsiCo (NASDAQ:PEP)

Financial Health - PepsiCo Inc. is experiencing deteriorating financial health, characterized by rising debt and weak cash flow [1] - The company has taken on over $6 billion in new debt in the first half of this year to fund acquisitions, following a $5.5 billion debt increase over the previous two years [2] - Free cash flow was negative in 2022 and 2024, with projections of less than $300 million this year against expected dividend payments of $7.6 billion [3] Debt and Leverage - GimmeCredit projects PepsiCo's leverage to reach 3.0 times its EBITDA by year-end, up from 2.6 times [3] - The combination of higher debt and weaker earnings is a significant concern for the company's financial stability [3] Activist Investor Involvement - Elliott Investment Management has taken a $4 billion stake in PepsiCo and is advocating for strategic changes, including refranchising bottling operations and divesting underperforming assets [4] - PepsiCo's management has indicated resistance to a bottling overhaul, viewing Elliott's push to sell weaker assets as a more constructive approach [5] Operational Performance - PepsiCo's sales volumes have consistently dropped over the past two and a half years, leading to a reliance on price hikes that may become challenging [5] - Operating margins have declined in the last two quarters due to increased marketing expenses, prompting forecasts of a modest decline in EBITDA for 2025 [6] Stock Performance - PepsiCo's stock fell 0.35% on Thursday and is down 6.31% year-to-date and 19.43% over the year [7] - The stock maintains a weaker price trend in the short and long terms, with a relatively moderate growth ranking [7]