PepsiCo Q3 preview: Where next for PepsiCo shares?

PepsiCo has performed well over a tough 18 months as people continued to consume its snacks and beverages during lockdown, but investors are hoping there is plenty of upside potential as out-of-home markets bounce back.

When will PepsiCo release Q3 results?

PepsiCo will release third quarter earnings before US markets open on Tuesday October 5.


PepsiCo Q3 earnings preview: what to expect from the results

PepsiCo, known for its soft drinks but also the seller of other big brands including Lay’s crisps and Tropicana juices, is expected to report 4.2% year-on-year core EPS growth in the third quarter, marking a significant slowdown from the 30% growth delivered in the second quarter when it benefited from weaker comparatives.

Analysts are expecting third quarter revenue to rise to $19.39 billion from $18.09 billion the year before, with core EPS forecast to rise to $1.73 from $1.66. Reported EPS at the bottom-line is anticipated to increase to $1.70 from $1.65. Notably, PepsiCo has beaten expectations when it comes to core EPS for the last 10 consecutive quarters.

The strong growth delivered in the previous quarter prompted PepsiCo to raise its full year guidance in July, with the firm now chasing annual organic revenue growth of 6% and core EPS growth of 12%.

The strong performance in the last quarter was driven by a significant improvement across all of its divisions as they bounced back from the pandemic-hit quarter a year earlier, with volumes and prices improving across the board apart from its Quaker Foods North America segment, which is coming up against tougher comparatives than the wider business after business boomed last year.

The firm’s snacks and beverages are expected to have continued to benefit from resilient demand from customers at home, with investors hoping the reopening of out-of-home venues like restaurants and bars can provide a catalyst. PepsiCo has said it expects its snacks and beverage businesses in North America to remain resilient going forward and benefit as the economy reopens, and said it was continuing to perform well overseas despite the uneven recovery across different geographies. However, with vaccinations progressing and restrictions being eased, the international arm boasts plenty of upside potential as economies bounce back.

The 23 brokers that cover PepsiCo are bullish on the stock with an average Buy rating and a target price of $166.19, implying there is over 10% potential upside from the current share price.


Where next for the PepsiCo share price?

PepsiCo rallied hard from March hitting an all time high of 159.60 on August 20th. Since then, the price has been trending lower. It trades below its multi-week falling trendline resistance. A move below the 50 & 100 sma and the bearish picture on the RSI are keeping the sellers optimistic of further downside.  

Immediate support can be seen at 150, with a break below this level opening the door to 144 the late June low. 

Any recovery in the share price would need to retake the 100 sma at $152 in order to attack the falling trendline resistance at $154 and the 50 sma at 155. A move above this level could see the buyers gain momentum and head towards $159 and fresh all-time highs. 

Where next for the PepsiCo share price?

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