PepsiCo's (PEP) Q2 results were driven by improved productivity, leading to an increased full-year EPS outlook and 70% growth in productivity savings in H2, Morgan Stanley said in a note Friday.

Despite better Q2 performance overall, North America's topline growth remains soft, with organic sales growth of just 0.5% in Q2 versus 1.3% expected, according to the note.

"We remain Equal Weight, with still muted topline with US woes offset by solid international growth and heightened productivity," Morgan Stanley said.

Morgan Stanley said PepsiCo is integrating its US food and beverage operations under the "One North America" program to drive cost efficiency, including facility closures, headcount reduction, and logistics integration.

The firm raised its price target on PepsiCo stock to $165 from $153 with an equal weight rating.

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