On April 16, Pepsi (PEP) shares broke out after posting first-quarter earnings. Revenue grew by 8.5% Y/Y to $19.44 billion. The 2026 outlook is also appealing. This suggests that investors should consider buying Pepsi shares.
Pepsi demonstrated stronger results, helped by sales in its convenience food segment. Food volume sales increased by 4%, offsetting the flat volume of beverage sales. Pepsi expanded its operating margin by 10 basis points.
Pepsi has a strong outlook ahead, too. EPS will grow by between 4% and 6%. By returning around $8.9 billion to shareholders through dividends of $7.9 billion and $1.0 billion from share buybacks, PEP stock offers stable returns this year.
Risks
High gas prices and stubborn inflation for food, shelter, insurance, and clothing hurt consumer disposable income levels. Consumers will continue to shop in-store brands. Those are cheaper alternatives to Pepsi or Coke (KO). Procter & Gamble (PG) shares are performing poorly on concerns that consumer sales will weaken.
Your Takeaway
Pepsi set its hedges six to 12 months ahead of time, bracing for inflation related to the Iran conflict. If geopolitical tensions subside by then, Pepsi should report stronger results in 2027 and beyond. Until then, Pepsi has key brands like Lays and Tostitos that benefit from preferential store placement and show up in more spaces. Volume growth will improve as Pepsi offers multipack and multiserve packaging options.
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