PepsiCo: Appeal Improves Despite Concerns

Summary:

• PepsiCo’s shares have stagnated due to reliance on pricing over volume growth and higher interest rates, but falling rates and a higher earnings yield increase appeal.
• Despite solid financials and modest leverage, weak volume trends and political changes raise concerns, prompting a cautious stance on buying the dip.
• Recent bolt-on deals and a 7% dividend hike improve positioning and yield, but the nomination of RFK Jr. as health secretary adds uncertainty.
• Valuations are improving, but I recommend waiting for a $150 entry point due to health concerns and political headwinds impacting ultra-processed foods.

Shares of PepsiCo (NASDAQ:PEP) have been trading stagnant for quite a while now, something which did not entirely surprise me as I had short term tactical concerns on the company in the spring of 2023.

The solid long-term performer

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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