Wells Fargo Sees No Fizz in PepsiCo (PEP) Amid Profitability Concerns

On June 4, Wells Fargo analyst Christopher Carey maintained a Hold rating on PepsiCo Inc. (NASDAQ:PEP) with a price target of $140, citing ongoing challenges in the company’s North American food division related to costs and volume trends.

Carey notes that PepsiCo is struggling to adjust its cost structure to current market conditions, which could affect its near-term earnings. He argues that growth in the food sector is currently largely driven by shifts in consumer demand rather than companies gaining market share, a trend he thinks may continue.

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Despite PepsiCo’s efforts and past investments, the company has not been able to reinvigorate volume growth, raising concerns about its ability to sustain revenue momentum. In particular, the Frito-Lay and Quaker Foods unit has seen pressure from weaker volumes and rising costs, which have weighed on operating margins.

Carey believes that meaningful cost restructuring, including workforce reductions and other expense controls, may be necessary to improve profitability and support EPS growth. Without such steps, the stock could remain under pressure, warranting a neutral stance.

PepsiCo Inc. (NASDAQ:PEP) is a leading global food and beverage company. Its product offerings span beverages, snacks, and convenient foods, with notable brands such as Pepsi, Mountain Dew, Gatorade, Tropicana, Lay’s, Doritos, Cheetos, Quaker, and SodaStream.

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