Answering a caller’s query about PepsiCo, Inc. (NASDAQ:PEP) during the September 28 episode of Mad Money, Jim Cramer remarked:
I actually had a conversation with Jeff Marks, who runs the Charitable Trust with me, about PepsiCo. I felt that it would be beneficial to, when it got to 5%, maybe take a position. But if you take a look at the stock, what it’s telling you is, down 10% for the year, that the dividend may not preserve or act as a trampoline I once thought it would. Why? Frito-Lay. The business is a tough one right now, and people don’t want it. The only one of these stocks that I saw that was really having any luck here is Procter & Gamble, and that’s because it has nothing to do with food.
You can read Jim Cramer Shares Why PepsiCo (PEP) Caught His Eye During Consumer Headwinds and Jim Cramer on Procter & Gamble (PG): “They Don’t Have the Growth That I Want” for further insight into Cramer’s comments about the two companies.
PepsiCo’s Frito-Lay Weakness is Showing Up in Earnings
PepsiCo Foods North America reported a 2% decline in second-quarter revenue, with lower effective net pricing contributing to the decline. PepsiCo, Inc.’s Q2 results also showed core constant-currency operating profit at PFNA fell 8%. The company is also adjusting its pricing strategy. Reuters reported on September 24 that the company plans to raise prices on some chip brands by a low- to mid-single-digit percentage range, with the new prices expected to remain below levels before the cuts made earlier in the year. Reuters also reported that PepsiCo had cut prices by as much as 15% on products including Lay’s and Doritos in February after consumers pushed back against previous price increases. The company is supposed to report third-quarter results on October 8.
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P&G Has Slower Growth But Different Exposure
The Procter & Gamble Company’s (NYSE:PG) latest results point to a slower-growth business, with fiscal 2026 net sales increasing 3% to $87 billion and fourth-quarter organic sales remaining flat. Core EPS increased 1% to $6.89 for the full fiscal year. For fiscal 2027, it expects organic sales growth of 1% to 3% and core EPS of $6.89 to $7.11. CEO Shailesh Jejurikar said P&G is expected to “deliver progress” in fiscal 2027 despite continued volatility, with the company focused on putting the consumer first, integrated execution, and productivity. P&G is scheduled to report first-quarter fiscal 2027 results on October 22.
Risks for PepsiCo and P&G
For PepsiCo, Inc., the central downside risk is continued weakness in Frito-Lay. PepsiCo Foods North America’s second-quarter revenue fell 2%, while core constant-currency operating profit declined 8%. The business is also moving from February price cuts of as much as 15% on some products to low- to mid-single-digit increases on selected brands, creating uncertainty around how pricing and demand will develop. If demand remains weak, further pricing changes could limit the pace of an earnings recovery.
The Procter & Gamble Company’s downside case is more closely tied to limited earnings growth and rising costs. Organic sales increased just 1% in fiscal 2026, while fiscal 2027 guidance calls for core EPS growth of 0% to 3%. P&G also expects an approximately $1 billion after-tax headwind from higher raw materials, energy, and transportation costs. The combination of modest expected earnings growth and higher input costs could leave less room for a weaker-than-expected earnings outcome.
Hedge Fund Positioning, Short Interest, And Forward Market Expectations
As per Insider Monkey’s data, tracking more than 1,000 hedge funds, there were 68 hedge fund holders of PepsiCo in the second quarter, down from 72 in the first quarter, while P&G had 83 holders, up from 78 in Q1. Moreover, 1.90% of PepsiCo’s public float was sold short, compared with 1.04% for P&G.
Procter & Gamble trades at a forward P/E of 21.23, pulling ahead of the broader S&P 500 multiple range of 19.1x–19.4x despite its modest growth outlook and defensive demand profile. On the other hand, PepsiCo trades at a lower forward multiple of 14.86, showing near-term volume adjustments in its convenient foods division while reflecting concerns around near-term volume trends in its convenient foods division.
Cramer’s comments put the focus on different pressures facing the two consumer-staples stocks. PepsiCo, Inc. is dealing with weakness in Frito-Lay and another round of pricing changes, while The Procter & Gamble Company’s fiscal 2027 outlook combines modest growth with significant cost pressures. The next earnings reports from both companies will provide a fresh look at those issues.
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