PepsiCo's Deep Discount Will Soon Evaporate: Buy It While You Can

Core Viewpoint - PepsiCo's stock is currently undervalued, with a potential for significant price appreciation based on its recent earnings report and historical valuation metrics [2][3]. Financial Performance - PepsiCo reported a 2.7% systemwide growth in FQ3, slightly above MarketBeat's consensus, driven by strong performance in core beverage and international markets [5]. - The company experienced a 3% organic contraction in PepsiCo Foods North America, while other segments showed low- to mid-single-digit organic growth [5]. - Operating income decreased by only 1.5% and adjusted earnings fell by 2%, indicating better-than-expected margin performance [7]. Future Guidance - The guidance for FQ4/FY indicates a low-single-digit organic revenue increase and slightly narrower margins, but management is focused on growth acceleration through innovation and operational improvements [8]. - Capital return outlook for 2025 includes $8.6 billion in returns, supporting the company's financial health [8]. Dividend and Shareholder Returns - PepsiCo has a reliable capital return strategy, with a dividend yield of 3.80% and a history of 54 consecutive years of dividend increases [9][10]. - The company maintains a mid-single-digit distribution CAGR and reduces share count by approximately 0.5% annually [10]. Institutional Activity - Institutional buying has been robust, with institutions acquiring over $2 in shares for every $1 sold, indicating strong support for the stock [12]. - The ownership rate among institutions exceeds 70%, suggesting confidence in the stock's recovery potential [12]. Stock Price Action - Following the earnings release, the stock price shows bullish momentum, with expectations of a rebound and potential rise towards the $155 resistance level [13].