Pepsi Q3 Earnings Preview: Will Beverage Giant See Shares Lose More Weight In 2023?

PepsiCo PEP is among the food and beverage stocks that could see declining sales and momentum lost from investors due to new weight loss drugs.

Here’s a look at where the soft drink and snack giant stands ahead of its third-quarter (Q3) financial results.

Earnings Estimates: Pepsi is set to report Q3 financial results before the market opens on Tuesday, Oct. 10, 2023. Analysts expect the company to report Q3 revenue of $23.43 billion, according to data from Benzinga Pro.

The revenue estimate would mark an increase over the $21.97 billion reported in the third quarter of the last fiscal year. Pepsi has beaten analysts' estimates for revenue in the last nine straight quarters.

Earnings per share estimates from analysts see Pepsi reporting a profit of $2.15 per share for the third quarter. This would mark an increase from the $1.97 reported for the same time period last year.

Pepsi has beaten earnings per share estimates in the last nine straight quarters.

In its Q2 report, the company raised its full-year organic revenue growth outlook to 10%, from previous guidance of 8%.

Related Link: Snacks In The Ozempic Era: Food And Beverage Stocks Crash With Weight Loss Drugs 

What Analysts Are Saying: Several analysts have been lowering their price targets:

• Wells Fargo analyst Chris Carey lowered the price target from $196 to $170 and kept an Equal-Weight rating on the stock.
• Barclays analyst Lauren Lieberman lowered the price target from $198 to $179 and kept an Overweight rating.
• Wedbush analyst Gerald Pascarelli lowered the price target on Pepsi from $206 to $195 while keeping an Outperform rating.

“While robust pricing has driven the YTD outperformance, we expect price/mix to moderate relative to 1H23 levels, with 3Q reflecting the start of what will ultimately be a normalization in trend as we progress throughout the year and head into 2024,” Pascarelli said.

Valuation on the stock is compelling at current levels compared to the five-year average, he added.

Pricing and volume are two of the major items the analyst is looking towards when Pepsi reports Q3 results.

“Based on the moderation in pricing seen over the course of the quarter in U.S. measured channels, we expect similar levels of deceleration in developed international markets.”

There are also macro risks to consider, with CPI levels showing an uptick in recent reports. Gas prices have also risen in recent months, according to the analyst. While both of these figures have improved significantly from last summer, they remain risks to a company like PepsiCo.

“Based on current market dynamics and limited upside to current guidance over the back half of the year, we are lowering our PT to $195.”
Key Items to Watch: Bank of America analyst Geoff Meacham said obesity drugs could impact the biopharm industry and reshape consumer behavior.

Whether popular weight loss drugs like Ozempic and Wegovy will hurt companies like Pepsi remains to be seen.

It's "too early to assess," Pascarelli said, adding that "fears are likely overblown."

Still, investors will likely want to hear more color from PepsiCo after a report from Walmart said there was a decline in shopping demand for certain products due to weight loss and appetite-suppressing drugs, indicating that at-home consumption and snacking could be among the hardest-hit areas.

Pepsi's rival, The Coca-Cola Company KO, is set to report earnings on Oct. 24.

Both stocks are down, but PepsiCo has held up more favorably year-to-date in 2023, which could be due to the company’s diversification from beverages.

PEP Price Action: Pepsi shares are down 1% to $158.92 on Monday versus a 52-week trading range of $155.83 to $196.88. Shares of the consumer products company are down 11% year-to-date in 2023.

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