Pepsi’s strong earnings, raised forecast arouse adulation on Wall Street
Joe Raedle

Wall Street analysts looked glowingly upon PepsiCoâs (NASDAQ:PEP) third quarter earnings results on Wednesday.
The Purchase, New York-based beverage giant posted beats on top and bottom lines for the third quarter prior to Wednesdayâs market open, led by a surge in snack sales and continued growth in the core beverage business. The resilient results came despite persistent inflationary pressure and elevated foreign currency impacts. Based upon that upside surprise, CEO Ramon Laguarta said the company would hike its forecasts for EPS and revenue by 2% each.
While analysts were already largely bullish on the stock, the strong results encouraged increased optimism on the Street.
For example, Evercore ISI, Bank of America, and Morgan Stanley each applauded the companyâs pricing power amid a sustained period of inflation.
âWe reiterate our Buy rating and $190 [price target] after the clean beat as better price/mix with marginally weaker volume bodes well,â Bank of America analyst Bryan Spillane told clients on Wednesday. âWe believe PEPâs premium to non-alcoholic beverage peer average of 22.9x is warranted by their strengthened position and pricing power.â
The pricing power was also noted by Seeking Alpha contributor Justin Purohit, who pointed to particular strength in Latin America âdue to effective net pricing and consistent volume growth" in the beverage business.
âThe operating strength is indicative of the appeal of their savory snacks and beverages that are both convenient and affordable relative to other consumer discretionary purchases,â Poruhit commented. âThough new investors may find more lucrative opportunities elsewhere, PEP remains a quality long-term portfolio holding.â
Similarly, Morgan Stanley analyst Dara Mohsenian highlighted the stock as a quality pick for client portfolios. He reiterated a Buy-equivalent rating alongside a $198 price target, advising clients that âtopline momentum is continuing based on strong US/European scanner data,â meaning even the raised guide âlooks conservative.â He added that the maintenance of a sizable shareholder return program is another positive.
âPepsi remains our favorite mega-cap pick here rated OW, with Q3 offering further evidence of very strong Pepsi pricing power and limited demand elasticity, and that Pepsi is morphing into a higher growth topline compounder longer-term and deserving of a higher multiple,â Mohsenian concluded.
To be sure, Shoggi M. Ezeizat, a consumer sector analyst at Third Bridge, warned that supply chain constraints could keep a lid on further upside. 
âSupply shortages are actually the greatest barrier to PepsiCo expanding its multipack offerings,â Ezeizat said. âOur experts say that SKU rationalizations are needed to ensure stable supply and reassure retailers that there will be no empty shelves during the higher demand holiday season.â
Ezeizat added that the Layâs brand is âthe most vulnerable to private label products' riskâ as consumers tighten belts.
Shares of Pepsi (PEP) rose 4.03% on Wednesday, leading consumer staples stocks higher on the day.
Dig into the range of analyst ratings on the stock.