PepsiCo (PEP) could improve its results in H1 after the company posted a modest Q4 beat across metrics and reiterated its 2026 guidance, Morgan Stanley said in a note Tuesday.

The report said Frito-Lay North America is in focus as the firm expects Frito-Lay to grow volume, net revenue, and operating margin in 2026, with growth to come early in the year.

"We are encouraged that Pepsi is taking aggressive actions in FLNA," the report said, pointing to price reductions, innovation,

and greater advertising, among others.

Still, Morgan Stanley continued to view the stock as more glass half full with compressed valuation.

"Ultimately, while we see reported results as likely to improve in

H1, we wait to see more signs that consumer takeaway trends are sustainably recovering," the note said.

Morgan Stanley raised its price target to $180 from $165 while keeping its equal weight rating.

Price: 166.03, Change: +3.18, Percent Change: +1.95