PepsiCo (PEP) traded slightly higher after announcing a review of its North America supply chain that will include aggressively reducing costs to drive growth. The review followed weeks of discussions with activist investor Elliott Investment Management, which has a $4 billion stake in the beverage giant and pushed the company to take several steps, including refranchising or spinning off its bottling operations.
UBS thinks the fact that Buy-rated PepsiCo (PEP) reiterated 2025 guidance and provided an initial perspective on 2026 that pointed to improved organic revenue growth and EPS growth that is in-line or slightly above consensus expectations will be viewed by investors as a positive surprise. “We do not think the announcement will completely alter the debate, as many investors are likely to wait for greater evidence that the commercial actions are driving an improvement in trends, but we think this will be viewed as a step in the right direction,” wrote analyst Peter Grom.
TD Cowen analyst Robert Moskow said his firm’s sense is that Elliott’s engagement with PepsiCo (PEP) created a greater sense of urgency for the company to execute its strategy, although there was not a revolutionary shift. Moskow believes some investors will welcome the visibility PepsiCo (PEP) management has provided in an environment where many consumer staples peers are missing estimates and the prospects of exiting FY26 back on algorithm. TD Cowen has a Hold rating on PepsiCo (PEP).
Jefferies analyst Kaumil Gajrawala noted that the response from PepsiCo (PEP) to shareholder pressure was not business as usual. However, Gajrawala and his team think that there is a lot of work to do and the dual initiatives of a top-line rebound and cost cuts will be hard. “While Pepsi Foods remains a good asset, it is struggling. Innovation, openness to ideas, a new CFO, and a refreshed board should help, but it is too early to call for a turnaround in fundamentals,” he highlighted. Jefferies kept a Hold rating in place on PepsiCo (PEP).
Shares of PepsiCo (PEP) edged 0.2% higher in premarket trading on Tuesday.