By Evie Liu

PepsiCo revenue has been falling on a year-over-year basis for two quarters in a row thanks to weak sales for both snacks and beverages in the North America market. Wall Street is expecting the same for the second quarter ended on June 14.

PepsiCo is set to report quarterly earnings on Thursday before the market opens. Analysts polled by FactSet expect the company to post $2.03 in earnings per share, down 11% from a year ago. Sales are expected to slide 1% to $22.2 billion.

PepsiCo's beverage segment continues to lose share, and its formerly fast-growing snack business is being hit by weak consumer spending amid inflation fears, shifting health priorities, and possibly a backlash against ultra-processed foods.

In the first quarter, organic sales for PepsiCo's North America food unit, which sells Doritos, Lay's, and many other snacks, declined 2% from a year ago. While beverage sales increased 1%, most of it was driven by price increases. Beverages sales volume actually shrank 3%.

Potential tariffs could further drive up freight and packaging costs and squeeze margins. In April, PepsiCo said it expects 2025's earnings to be flat from a year ago in constant currency, down from the previous expectation of mid-single-digit growth.

PepsiCo shares have tumbled 26% from their recent high on May 17, 2024, to $135 on Wednesday. It badly lags behind soda rival Coca-Cola and the S&P 500, which are up 10% and 18%, respectively, over the same period.

Ahead of the earnings report, BNP Paribas Exane analyst Kevin Grundy trimmed his estimated target price for the stock by 4% to $136, but kept a Neutral rating. The stock's current valuation, at 17 times forward earnings, is roughly at a 10% discount from other staples peers, he said.

Grundy wrote that PepsiCo management might trim its 2025 guidance again due to protracted weakness that calls for higher investment.

"Investors will not have an endless reservoir of patience for PepsiCo to 'right the ship' in North America as results continue to wane," he wrote, "We have considerable respect for leadership, but greater urgency may be called for with everything on the table to unlock value."

Deutsche Bank analyst Steve Powers has a more optimistic view of the packaged-food and beverage giant. "We continue to believe the intrinsic value of PepsiCo exceeds its current trading price," he wrote in a note last month.

Still, Powers acknowledges that recent consumption trends have broadly disappointed, which puts rising pressure on the bull case and causes investors to increasingly question PepsiCo management's current strategic priorities, direction, and urgency.

For second-quarter earnings, Powers said he specifically looks for PepsiCo management to provide updates on how it plans to appeal to consumers' desire for value, sharpen innovation to meet recent trends like high protein, and accelerate productivity through efficiency efforts.

Those discussions will be "meaningfully important to build confidence that the future will be different (i.e., better) than the recent past," wrote the analyst. He has a Buy rating for the stock and a $148 target price, indicating a 9% upside.

Write to Evie Liu at evie.liu@barrons.com

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July 16, 2025 14:15 ET (18:15 GMT)

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