PepsiCo, Inc. (PEP) is Attracting Investor Attention: Here is What You Should Know

PepsiCo (PEP) has recently been on Zacks.com's list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock's performance in the near future.Over the past month, shares of this food and beverage company have returned +2.1%, compared to the Zacks S&P 500 composite's +3.6% change. During this period, the Zacks Beverages - Soft drinks industry, which PepsiCo falls in, has gained 2.4%. The key question now is: What could be the stock's future direction?While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.Earnings Estimate RevisionsRather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.PepsiCo is expected to post earnings of $2.23 per share for the current quarter, representing a year-over-year change of +13.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +3.7%.For the current fiscal year, the consensus earnings estimate of $8.11 points to a change of -0.6% from the prior year. Over the last 30 days, this estimate has changed +1%.For the next fiscal year, the consensus earnings estimate of $8.56 indicates a change of +5.6% from what PepsiCo is expected to report a year ago. Over the past month, the estimate has changed +0.7%.Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, PepsiCo is rated Zacks Rank #2 (Buy).The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:12 Month EPSRevenue Growth ForecastWhile earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.In the case of PepsiCo, the consensus sales estimate of $28.84 billion for the current quarter points to a year-over-year change of +3.8%. The $93.5 billion and $96.55 billion estimates for the current and next fiscal years indicate changes of +1.8% and +3.3%, respectively.Last Reported Results and Surprise HistoryPepsiCo reported revenues of $23.94 billion in the last reported quarter, representing a year-over-year change of +2.7%. EPS of $2.29 for the same period compares with $2.31 a year ago.Compared to the Zacks Consensus Estimate of $23.88 billion, the reported revenues represent a surprise of +0.25%. The EPS surprise was +0.88%.Over the last four quarters, PepsiCo surpassed consensus EPS estimates three times. The company topped consensus revenue estimates three times over this period.ValuationWithout considering a stock's valuation, no investment decision can be efficient. In predicting a stock's future price performance, it's crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company's growth prospects.Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.PepsiCo is graded C on this front, indicating that it is trading at par with its peers. Click here to see the values of some of the valuation metrics that have driven this grade.ConclusionThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about PepsiCo. However, its Zacks Rank #2 does suggest that it may outperform the broader market in the near term.Zacks' Research Chief Picks Stock Most Likely to "At Least Double"Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.See Our Top Stock to Double (Plus 4 Runners Up) >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PepsiCo, Inc. (PEP): 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