PepsiCo Downgraded by JPMorgan to Neutral on Stalled US Turnaround

JPMorgan downgraded PepsiCo (PEP) to Neutral from Overweight and slashed its price target, citing a stalled turnaround in the company's North American business and mounting cost pressures. This marks the second time in a week that a major bank has cut its rating on the food and beverage giant.

JPMorgan Cites Stalled Recovery

In a note to investors, JPMorgan analyst Andrea Teixeira lowered the firm's price target on PepsiCo stock to $138 from a previous $170. The bank acknowledged that the upcoming quarter might appear solid due to one-off boosts from strong international sales, aided by favorable weather and the FIFA World Cup.

However, Teixeira argued that these temporary factors mask underlying weakness. The note stated that the recovery in the Frito-Lay North America (FLNA) salty snacks division has "stalled" and its performance remains "lackluster." This is despite several interventions by the company, including ingredient reformulations, new packaging, increased spending, and lower prices.

Earnings Estimates Cut

JPMorgan warned that rising expenses, including new transportation costs, will likely force PepsiCo to rely more heavily on cost-saving measures to achieve the low end of its full-year guidance for 5% to 7% earnings growth.

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Reflecting this more cautious outlook, the bank reduced its earnings per share (EPS) estimates for PepsiCo. The 2027 EPS estimate was cut to $8.86 from $9.05, and the 2028 estimate was lowered to $9.33 from $9.57. Both revised forecasts now sit below consensus estimates. "As estimates will likely move down from here, we expect investors to wait for expectations to be more realistic... before becoming more constructive again," Teixeira wrote.

Second Downgrade This Week

The move from JPMorgan follows a similar downgrade earlier in the week from Deutsche Bank. On Monday, Deutsche Bank cut its rating on PepsiCo to Hold from Buy and reduced its price target to $138 from $155.

Deutsche Bank analyst Steve Powers expressed "less certainty in PEP's strategic direction in North America," noting that the company's various turnaround initiatives have yielded only "mixed or fleeting benefits."