PEP – Market expectations are for Uniform ROA to rise, but management may have concerns about profitability, guidance, and contingency plans

June 3, 2022

  • PepsiCo, Inc. (PEP) currently trades near corporate yet above historical averages relative to Uniform earnings, with a 26.2x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to rise to 30%, accompanied by 3% Uniform asset growth.

  • Meanwhile, analysts expect Uniform ROA to improve to 22% by 2023, accompanied by 2% Uniform asset growth.

  • If sustained going forward, these levels would imply a stock price closer to $111, representing approximately 35% equity downside for the firm.

  • Moreover, the firm’s most recent earnings call suggests management may have concerns about profitability, guidance, and contingency plans

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