PepsiCo (PEP) continues to benefit from strong international demand, but a sluggish recovery in its North American business is limiting upside, RBC analysts said in a note on Friday.

The weaker-than-expected performance in its domestic market comes as affordability initiatives have yet to generate enough volume growth to offset pricing pressure, the analysts added.

International operations, meanwhile, were underpinned by strong organic growth across Asia Pacific, EMEA and international beverages.

PepsiCo's Q3 earnings are expected to take a hit from rising commodity costs, higher taxes and increased investments before rebounding in Q4 driven by productivity gains. RBC reiterated a 'sector perform' on the stock, but lowered its price target to $161 from $163.