Earnings beat, dividend increase and new protein snacks put PepsiCo (PEP) in focus

PepsiCo (PEP) has been back in the spotlight after beating recent earnings expectations, reaffirming full year guidance, raising its dividend for the 54th straight year, and rolling out new protein focused snacks and health oriented drinks.

PepsiCo’s recent product launches and dividend increase have come alongside mixed price action, with a 1-day share price return of 1.16% and year to date share price return of 5.86%, but a 90-day share price return that is down 10.55%. The 1-year total shareholder return is 21.08%, suggesting recent momentum has softened compared with the longer term.

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With earnings ahead of expectations, a long dividend growth streak, and a share price that has cooled over the past quarter, is PepsiCo quietly trading at a discount, or is the stock already pricing in years of future growth?

Most Popular Narrative: 6.1% Undervalued

PepsiCo’s latest close at $150.57 sits below a fair value estimate of $160.43, which, according to Serpentaire, reflects a measured but positive view of the company’s earnings power.

Future Efforts: Digitalization:

• Automation of the supply chain.

• Investment in data, enabling large-scale digitalization across the entire value chain (from procurement to factory management, including transportation and market placement).

• Improved understanding of ROI to optimize advertising and marketing expenses.

Geographical Expansion:

• Construction of two renewable energy-powered factories in Vietnam, with a total investment of $400 million:

• $300 million for a beverage factory in Long An, operational in Q1 2026.

• $90 million for a food processing factory in Ha Nam, operational in Q3 2025.

• Acquisition of Varun Beverages, a bottler in Africa, to expand operations in the region.

• Increased investments in India to capture additional market share.

Product Diversification:

• Acquisition of Siete Foods, specializing in Mexican cuisine, aiming to appeal to the growing Hispanic population in the United States.

Environmental Responsibility:

• Carbon Neutrality by 2040: Expansion of the electric fleet, particularly in California, with 50 Tesla trucks and 75 Ford E-Transit vans.

• 2.8 Million Hectares of Regenerative Agriculture by 2030.

Thoughts

• Generation Z snacks more and prefers small meals over large ones.

• Margins are stable.

• PepsiCo is more capable than other companies, such as Monster Beverages or Coca-Cola, of offering healthier and more diversified products.

• Investments in the Indian and Vietnamese markets could benefit the company in the medium to long term.

I would say that PepsiCo stands out as one of the most robust and interesting companies in the consumer goods sector, to my knowledge, and compared to its peers. We need to monitor its future progress and whether it succeeds in meeting its commitments.

Valuation

• 2% annual revenue growth

• PER of 26 just like the 10 years average

PEP seems to be fairly valued today but I tend to be optimistic about the company and believe it may exceed my expectations.

Curious how a modest growth outlook, steady margins and a premium earnings multiple still lead to an undervaluation call? The full narrative unpacks the assumptions step by step, and shows how they combine into that $160.43 fair value estimate.

Result: Fair Value of $160.43 (UNDERVALUED)

However, those fair value assumptions could be challenged if PepsiCo’s expansion and digital projects require heavier spending than expected, or if consumer demand shifts away from its core categories.

Next Steps

With mixed signals across valuation, sentiment and recent price action, the key question is what matters most to you right now. Move quickly, review the data and weigh both sides by checking the 3 key rewards and 3 important warning signs.

Looking for more investment ideas?

If PepsiCo is on your radar, do not stop there. Fresh ideas across income, value and quality could sharpen your next move before the market reacts.

• Target reliable income potential by scanning for companies that show up in our 10 dividend fortresses and see which yields actually look built to last.
• Hunt for compelling value by checking stocks highlighted in the 49 high quality undervalued stocks that combine solid fundamentals with room for a re rating.
• Prioritize resilience by focusing on companies featured in the 67 resilient stocks with low risk scores and see which profiles line up best with your risk comfort.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.