Does Pepsi’s latest earnings beat make the stock a buy?
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PepsiCo (NASDAQ:PEP) recently issued an earnings report that surpassed analyst expectations and inspired a notable rise in the firm's stock price. For investors looking at defensive names in the 2023 trading year, do these recent financial figures suggest the soft drink and snack giant has become a long-term buy?
Earnings Beat
Last week, PepsiCo (PEP) announced its earnings figures for the fourth quarter, surpassing analyst estimates on both the top and bottom lines. Looking at the specific numbers, PEP posted Q4 Non-GAAP EPS of $1.67, which outdid estimates by $0.02. At the same time, the company delivered revenue of $28B, which topped forecasts by $1.18B.
The company also initiated 2023 guidance, which called for 6% organic revenue growth. In addition, PEP raised its dividend by 10%.
Shares edged up in the wake of the quarterly report, posting modest gains on both Thursday and Friday. The stock followed this up with another mild advance in Monday's intraday trading.
This post-earnings upswing has overcome weakness seen earlier in the year, leaving PEP basically flat for 2023 so far. This followed an advance of 4.9% in 2022, leaving the stock higher by more than 6% for the past 12 months. For comparison, the S&P 500 (SPY) (SP500) remains about 6% lower for the past year.
Meanwhile, PEP represents a defensive name at a time when the looming potential of recession has complicated the investing landscape. The stock isn't alone in this regard. Competitor Coca-Cola (KO) is another core defensive name and is slated to deliver its latest earnings report later this week.
Aside from KO, other beverage names include the likes of Keurig Dr Pepper (KDP), Monster Beverage (MNST), National Beverage Corp. (FIZZ) and Primo Water Company (PRMW).
Is PEP a Buy?
Wall Street analysts generally have an upbeat opinion of PepsiCo (PEP). Among 23 analysts surveyed by Seeking Alpha, six have tagged the firm as a Strong Buy, while five others have labeled the company as a Buy.
Meanwhile, 10 analysts view the stock as a Hold. Looking at the bearish side of the argument, one analyst said PEP was a Sell and another has labeled it as a Strong Sell.
The stock currently trades near $178. Compare this to the Street's average price target, which stands at $186.14. Looking at the extreme opinions on this front, the high-end price target calls for the stock to reach $205. The lower-end target calls for shares to fall to $141.
While analysts maintain a generally bullish stance, Seeking Alphaâs Quant Ratings take a little more of a reserved view, grading PEP as a Hold. The system for rating quantitative measures gave Pepsi strong marks for profitability and momentum, with an A+ and a B, respectively, for these aspects. However, this was counterbalanced by Ds for the companyâs valuation and growth.
See a breakdown below:

Supporting the bulls, Seeking Alpha contributor Rishav Jain has a Buy rating on Pepsi. "The company is a financially sound, defensive, and an ever-rising dividend-paying name with the expectation of providing an almost 3% dividend yield in the coming years." Jain said. "I believe PepsiCo is a must-have stock in every dividend-focused portfolio, ETF, and mutual fund."
At the other end of the spectrum, fellow SA contributor Paul Franke believes that Pepsi is a Sell. Franke said: "PepsiCo is selling for one of its richest valuations ever in January 2023." Franke added: "I rate this defensive leader a Sell, until price retreats enough to produce smarter valuation support."
For market participants who may be interested in PEP but are not ready to go all-in, exchange traded funds may offer a more diversified solution. Currently, Pepsi is owned by a total of 290 ETFs. Here are the five that hold the largest positions in the company:

iShares U.S. Consumer Staples ETF (IYK) at 11.11% weighting.
Consumer Staples Select Sector SPDR Fund (XLP) at 10.41% weighting.
Vanguard Consumer Staples ETF (VDC) at 8.63% weighting.
Fidelity MSCI Consumer Staples Index ETF (FSTA) at 8.26% weighting.
ProShares Ultra Consumer Goods (UGE) at 5.63%weighting.

Looking at Monday's trading among the major U.S. equity averages, stocks advanced in intraday trading, clawing back some of last week's losses, as market participants placed their bets ahead of Tuesday's highly anticipated U.S. CPI report.