Are Functional Waters and Energy Drinks Reviving PepsiCo's PBNA Unit?

PepsiCo, Inc.’s PEP Beverages North America (“PBNA”) business remains a central pillar of its long-term growth strategy. In the third quarter of 2025, the PBNA segment delivered a strong performance, posting 2% organic revenue growth as business momentum continued to build. The improvement was driven by improving volume trends and broad-based strength across key brands. Trademark Pepsi recorded both volume and net revenue growth during the reported quarter, supported by double-digit gains in Pepsi Zero Sugar. Such results were further reinforced by effective marketing initiatives that enhanced brand relevance and consumer engagement, underscoring the company’s ability to leverage innovation and brand investment to drive incremental demand within its beverage portfolio. Flavor platforms like Mountain Dew saw renewed share momentum, with Baja Blast on track to exceed $1 billion in retail sales. The modern soda brand poppi also continued its rapid expansion, strengthening PepsiCo’s leadership in functional and better-for-you beverages. Within PBNA, management highlighted protein as a key strategic growth platform, reflecting PepsiCo’s broader focus on scaling permissible and functional offerings. In beverages, brands such as Muscle Milk and Propel provide established credibility in performance, hydration and wellness, enabling the company to innovate at scale with better execution. The relaunch of Muscle Milk, alongside innovations such as protein-enhanced Starbucks beverages, reflects a targeted push to capture growing consumer demand for protein, particularly in morning consumption occasions.While third-quarter results were somewhat impacted by tariff-related pressures, margins are already rebounding in the fourth quarter, positioning the segment to deliver positive margin expansion. Management expects PBNA to continue expanding margins at a healthy pace as cost pressures ease and innovation ramps up. Our model predicts revenues for the PBNA segment to improve 1% year over year in the fourth quarter and 0.8% in 2025.Looking ahead, PBNA’s top-line trajectory is expected to be driven by a more balanced contribution from volume growth and price realization. As consumer demand stabilizes, volume trends should continue to improve, while disciplined pricing and favorable mix support sustained revenue growth. This balanced dynamic positions PBNA for an acceleration in performance, with net revenue growth expected to continue gaining momentum ahead, reinforcing the segment’s role as a key growth engine for PepsiCo.PEP’s Peers: KO & MNSTThe Coca-Cola Company KO and Monster Beverage Corp. MNST are competing with PepsiCo.Coca-Cola operates a highly diversified global non-alcoholic beverage portfolio across carbonated soft drinks, hydration, energy, juices, dairy, coffee, tea and functional beverages. KO’s strategy centers on brand-led growth, premiumization, zero-sugar innovation and expansion in faster-growing categories. Management highlighted that Coca-Cola is leaning heavily into “bigger and bolder innovation,” introducing new products such as Sprite + Tea in North America, BACARDÍ Mixed with Coca-Cola in Mexico and Europe, and the Powerade Springboks Edition in South Africa — all of which are delivering strong velocities and meaningful contributions to revenues.Monster Beverage continues to benefit from constant growth in the global energy drink market, backed by strong demand across convenience stores and other key retail channels. In third-quarter 2025, the Monster Energy Drinks segment's sales grew 16% on a currency-adjusted basis. MNST continues to innovate with new flavors and health-oriented products while optimizing its supply chain and implementing strategic pricing actions. Building on the success of its $1 billion Ultra brand, Monster Beverage also introduced a new visual identity and merchandising strategy with dedicated Zero Sugar coolers, supported by a viral social media campaign around its flagship Zero Ultra drink.PEP’s Price Performance, Valuation and EstimatesShares of PepsiCo have gained 5.8% in the past six months compared with the industry’s drop of 1.4%.Image Source: Zacks Investment ResearchFrom a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 16.62X compared with the industry’s average of 17.84X.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for PEP’s 2025 earnings per share (EPS) implies a year-over-year drop of 0.5%, while that of 2026 EPS shows 5.4% growth. The estimates for 2025 have been on the rise, while the same for 2026 has moved down in the past 30 days.Image Source: Zacks Investment ResearchPepsiCo currently carries a Zacks Rank #3 (Hold). 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(PEP): Free Stock Analysis Report Monster Beverage Corporation (MNST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks