PepsiCo, Inc (NASDAQ: PEP) shares continue to trade near record highs after the company reported better than expected second-quarter earnings. On the other side, the U.S. stock market remains under pressure amid concerns that the economy could be hit by the fast-spreading Delta variant of the coronavirus.
Fundamental analysis: Strong earnings results came from adding market share
PepsiCo reported its second-quarter results last week; total revenue has increased by 20.5% Y/Y to $19.22 billion, while the GAAP EPS was $1.70 (beats by $0.18). Total revenue has increased above the expectations (+ $1.27 billion), and the company’s management expects the accelerating trends in the upcoming quarters.
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Hugh Johnston, CFO at PepsiCo, said that strong earnings results came from adding market share, including taking away customers from its biggest competitor, Coca-Cola. According to estimates, PepsiCo has more room to grow than Coca-Cola and represents a better opportunity for investors.
PepsiCo continues to respond to the needs of consumers in the best possible way, and the company also benefited from a strong performance from new products. PepsiCo expects to deliver 6% organic revenue growth for the 2021 fiscal year and EPS of $6.20 vs. a consensus of $6.09.
“Moving forward, we remain focused on winning in the marketplace and building competitive advantages that will position us well as consumer habits and preferences evolve over time,” said CEO Ramon Laguarta.
The board of directors declared a $1.075/quarterly share dividend last week, which will be payable on September 30 to stockholders of record as of September 3, 2021. The research company Argus upgraded PepsiCo shares and increased its price target to $169 on expectations that the company will continue to make business improvements.
Bryan Spillane, an analyst from Bank of America, also has a positive view on PepsiCo, and he assigned a buy rating with a price target of $170 based on his 25.6x FY22 EPS estimate (previously 25.5x).
PepsiCo began the third quarter in a strong position; still, the Delta variant of the coronavirus continues to pose downside risks. The battle against the coronavirus is still not over, and if the U.S. stock market enters a more significant correction phase, the share price could be at lower levels.
Technical analysis: PepsiCo shares remain in a bull market
According to technical analysis, there is no risk of a positive trend reversal for now, even though the investors have started to behave nervously amid concerns that the Delta variant of the coronavirus could hit the economy.
Rising above $160 supports the continuation of the bullish trend, and the next price target could be located around $165. On the other side, if the price falls below $150, it would be a strong “sell” signal, and we have the open way to $145 or even $140.
PepsiCo reported better than expected second-quarter results last week, and according to CFO Hugh Johnston, strong earnings results came from adding market share. The research company Argus upgraded PepsiCo shares and increased its price target to $169, while Bryan Spillane, an analyst from Bank of America, also has a positive view of PepsiCo.
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