PepsiCo loses bull rating at JPMorgan with few positive surprises anticipated in 2024

PepsiCo (NASDAQ:PEP) swung lower in early trading on Tuesday after JPMorgan lowered its rating on the beverage stock to Neural from Overweight despite what it called a strong record for the company.

Analyst Andrea Teixeira and team said that they do not see anything fundamentally wrong with PepsiCo (PEP) and continue to have confidence that the company is well positioned to deliver on its 2024 outlook.

“That said, we see the magnitude of upward estimate revisions as narrowing and see better opportunity within Beverages for OW-rated KO and KDP, which we expect to have a higher quality composition of top-line growth in CY24 and also don’t have the narrative overhang,” she added.

Teixeira and team noted that PepsiCo (PEP) management extraordinarily already promised to deliver at the high-end its algorithm in 2024 leaving limited room for positive surprises. It was also noted that PepsiCo’s (PEP) absolute earnings performance has been impacted by the stronger dollar over the past several years similar to other large-cap multinationals.

JPMorgan lowered its December 2024 price target on PepsiCo (PEP) to $176 from $185. The new PT is based on a 20X multiple to the 2025 P/E estimate.

Shares of PepsiCo (PEP) dipped 0.62% in premarket trading to $167.86 vs. the 52-week range of $155.83 to $196.88.