Pepsico Stock Price Forecast: Is PEP Still a Buy Around $168?

NASDAQ:PEP – Wide moat, rich multiple and a turning point after Q4 2025

NASDAQ:PEP – Where the stock trades now and what the market is discounting

NASDAQ:PEP trades around $168–$169, just under its $170.75 52-week high and far above the $127.60 low. On this price, the stock sits on a trailing P/E of roughly 28x GAAP earnings, while core 2026–2027 numbers imply a forward multiple in the high-teens to ~20x range. The dividend yield is about 3.3–3.5%, supported by a recent 4% dividend raise, and free cash flow for 2025 came in around $3.98B, implying a mid-4% FCF yield. The 18% share price run in 2026 has been driven mainly by multiple expansion from roughly 16x forward earnings back to ~20x. Fundamentals improved, but not enough to justify the entire move on earnings alone. At these levels the market is clearly paying upfront for a successful North American fix, continued international growth and the ability to hold margins while management experiments with price cuts. Upside from here depends on execution, not on the market simply re-rating a depressed staple.

PepsiCo earnings engine – revenue, margins and the quality of Q4 2025 growth

Q4 2025 confirmed that the earnings engine is working even on modest top-line growth. Net revenue reached $29.34B, up 5.6% year over year, with organic sales up 2.1% in the quarter and 1.7% for the full year; total annual revenue increased about 2.3%. The quality came from the P&L, not the headline sales growth. Core EPS printed $2.26 in Q4, up 16%, and $8.14 for the year, while the Q4 net margin reached 8.66%, roughly 58% higher than the prior year margin level. Management simultaneously tightened costs, expanded productivity savings and leaned on mix and pricing. That combination let margins widen even though physical units in key North American categories were flat to negative. The result is a profile that looks like a classic mature compounder: low-single-digit organic sales, high-single-digit to low-double-digit EPS growth and rising cash returns. The problem is that the stock now trades at a valuation that assumes this pattern continues smoothly while North America resolves its volume issues.

PFNA and PBNA – high-margin snacks, pressured volumes and why North America matters

PepsiCo Foods North America (PFNA), which now houses Frito-Lay and Quaker, is still the crown jewel. In 2025 the segment printed gross margins close to 62% and operating margins above 22%, numbers most packaged-food peers cannot touch. That margin structure is why the market pays a premium for PepsiCo Stock. But the volume data inside PFNA and PepsiCo Beverages North America (PBNA) show the stress behind those margins. Company-wide organic volume was down 2% in Q4 and for the full year. Within that, PFNA volumes fell about 2% and PBNA volumes declined roughly 5% in Q4 and 3.5% for the year. PBNA still managed positive organic revenue for the year because pricing and mix added about 5%, but the underlying units are shrinking. When the most profitable engine of the group relies on price to offset falling tonnage in an affordability-conscious North American consumer base, you are drawing down pricing power that took decades to build. The equity story now hinges on whether management can stabilise and then grow PFNA and PBNA volumes without destroying those margins.

International operations – 19 quarters of mid-single-digit growth carrying the load

Outside North America, the picture is much cleaner. The international businesses delivered mid-single-digit organic revenue growth again, with EMEA, LatAm Foods and Asia-Pacific Foods each in the roughly 4–6% range. In constant currency, several of these units posted double-digit core operating profit growth, including around 20% for Asia-Pac and about 10% for EMEA. International now represents roughly 44% of total revenue, and more importantly it is where most of the positive volume contribution comes from. Over a three-year period the group has achieved around 4.3% average organic revenue growth, but that came mainly from 7% pricing while volumes fell more than 2% annually; the international units are the main reason the consolidated volume number is not worse. The strategic implication is simple: international can extend the growth runway and support earnings, but it cannot fully compensate for structurally impaired PFNA and PBNA volumes because North America still dominates absolute profit and cash generation.

Pricing fatigue and the 15% discount push: margin risk in exchange for volumes

The ten-year pattern is clear. From 2016 to 2025, organic revenue grew about 5% per year on average, but only 0.5% came from volume; pricing did most of the work. In the last three years that imbalance intensified, with organic revenue around 4.3% annually, pricing up 7% and volumes down about 2.3%. That is exactly where resistance appears in a stretched middle-income consumer. Management is now responding by planning price cuts of up to 15% in key food categories, especially in snacks, timed around high-traffic events like the Super Bowl. The balance sheet and P&L can absorb a period of lower gross and operating margins. Gross margin sits above 50%, EBITDA margin near 18% and net margin in the high single digits; there is room to sacrifice 100–150 basis points in the short term. The risk is that volumes do not react strongly enough. If PFNA and PBNA only see low-single-digit volume growth after double-digit price reductions, earnings leverage will disappoint and the market will likely compress the multiple back down toward the mid-teens.

Structural moat of Frito-Lay and the Quaker drag inside PepsiCo Foods North America

Within PFNA, the Frito-Lay franchise remains the structural moat. Even before Quaker was folded into the segment, Frito-Lay North America ran operating margins far above large food peers like Mondelez, Kraft Heinz, Conagra or Hershey, with only selected Hershey years coming close. Those economics are built on dominant shelf space, brand equity in Lay’s, Doritos, Cheetos and Tostitos and a distribution system that saturates every channel. Integrating Quaker, which is structurally lower margin, dilutes the blended PFNA margin but creates an opportunity to run a unified supply chain and consolidate logistics for center-store and snack products. The threat is that volume erosion in these high-margin snacks persists just as Quaker’s problems come through. If management cannot convert this integration into tangible savings and renewed unit growth, PFNA’s contribution to group returns on capital and valuation will slip toward that of a normal packaged-food business instead of a moat asset.

Activist pressure, Elliott’s $4B stake and what it really changed at PepsiCo

The arrival of Elliott Management with roughly a $4B position forced a reprioritisation of capital allocation and cost discipline. PepsiCo agreed to cut expenses in North American food and beverages, streamline product counts, rein in capital spending and accelerate plant closures and headcount reductions. It stopped short of granting board seats or agreeing to spin off bottling and distribution, but the tone of communication shifted from narrative-heavy to execution-focused. Q4 2025 already reflects part of that pressure: core constant-currency operating profit in the quarter rose about 13% and core constant-currency EPS around 11%, far above the full-year growth rates, as restructuring charges began to pay off. Insider behaviour around the prior valuation trough also signalled internal confidence; that is visible in the detailed records of PEP’s insider transactions. The activist is not the thesis, but it is a catalyst forcing management to deliver measurable productivity and not just incremental adjustments.

Balance sheet strength, free cash flow and the dividend plus $10B buyback plan

The balance sheet supports an aggressive shareholder-return programme. Total assets at year-end 2025 were about $107.4B, with total liabilities near $86.85B and equity roughly $20.55B, implying net debt to total capital around 0.66. GAAP EBITDA covered net interest expense about 16–18 times in 2024–2025, and rating agencies keep the name at A+ with a stable outlook. Operating cash flow in 2025 reached around $6.62B, up just over 5%, while free cash flow rose roughly 25.7% to about $3.98B, helped by earnings growth and capital-spend discipline. Management guides to free-cash-flow conversion of at least 80% of net income in 2026 and at least 90% in 2027. Against this, investors receive a 3.3–3.5% dividend yield growing about 4–5% per year and a $10B buyback authorisation through February 2030. At the current market cap around $230B, that buyback can retire roughly 4–5% of the share count if executed near present prices. That combination of yield, growth and repurchases puts a floor under the stock on sell-offs, but it does not immunise holders against multiple compression if earnings growth slows.

Health, wellness and energy drinks – Celsius, Poppi and the race to catch new demand

Consumer preferences are shifting toward perceived health benefits and functional products, and PepsiCo Stock needs to track that shift to defend volume. Recent research indicates roughly a third of consumers increased healthier-snack consumption in the last year, while only about 15% increased traditional snack intake; around 60% actively look for better-for-you options. PepsiCo is pushing on several fronts. It owns around 11% of Celsius, a high-growth energy drink player that now also manages the Rockstar brand, and energy is capturing an outsized share of beverage category growth. The company is launching Pepsi with prebiotic ingredients and acquired Poppi, a prebiotic soda line that already ranks well in independent taste tests. Gatorade is being repositioned with no-sugar and functional hydration variants, while snack packaging and formulations increasingly highlight the absence of artificial flavors and dyes and promote whole grains in Quaker. The opportunity is clear: if these platforms scale, they can offset GLP-1-linked calorie reductions and regulatory pressure on sugar and salt. The risk is timing; smaller challengers still move faster in niche categories, and PepsiCo is leveraging distribution power to catch up rather than leading the innovation curve.

Bottling and distribution – why a KO-style spin may not be the real unlock

A core part of Elliott’s initial thesis was the potential for a Coca-Cola-style divestiture of bottling and distribution assets to elevate margins and returns. The long-term margin data suggest that move may not be the main value unlock at this stage. Even before KO spun off its bottling operations, KO’s operating margins averaged around 23% versus roughly 16% at PepsiCo. KO’s margin expansion post-spin did not immediately translate into persistent outperformance versus PEP; in fact, PepsiCo outperformed for several years afterwards. The performance gap only widened after PEP’s Quaker write-offs in 2024 and the emergence of Frito-Lay volume weakness. Meanwhile PepsiCo repurchased its main bottlers back in 2010 and has been integrating them deeply into its supply chain. Carving them out today, in the middle of a “One North America” integration of food and beverage logistics, would be operationally complex and might not deliver enough incremental economic benefit to justify the disruption. The priority is to extract more efficiency from an integrated system, not to repeat a financial engineering move that fit KO’s structure a decade ago.

New CFO from Walmart and the execution risk in “One North America”

The CFO transition is directly aligned with where the hardest operational work sits. Steve Schmitt, the new CFO, joins from Walmart U.S., which runs one of the most complex and efficient retail supply chains globally. PepsiCo’s CEO has been explicit: his job is to accelerate growth, optimise the cost structure and create greater shareholder value by executing on productivity and integration. “One North America” means unifying two legacy supply chains – foods and beverages – that were run in silos for decades. That involves plant closures, route rationalisation, SKU pruning, warehouse consolidation and better demand planning across PFNA and PBNA. The Q4 2025 numbers, with a 13% increase in core constant-currency operating profit and 11% growth in core constant-currency EPS, show the early impact of restructuring. The next phase will be harder: maintaining service levels and shelf presence while pushing more cost out. If Schmitt and the operating team deliver, structural margins in North America can rise even when pricing normalises. If they miss, the company risks burning political capital with Elliott and wasting the valuation re-rating achieved in early 2026.

Outlook, valuation framework and what needs to go right from 2026 onward

Management’s near-term guide is deliberately conservative. For 2026 it targets 2–4% organic revenue growth and 4–6% EPS growth in constant currency. The sell side expects around $9.14 in EPS for 2027, roughly 7% growth, while a more optimistic internal case sees about $9.45. Putting a 19x multiple on $9.45 gives a one-year valuation band near $180 per share. From today’s level near $168 that is about 7% capital upside, plus a 3.3–3.5% dividend yield and mid-single-digit dividend growth; the result is a potential 10–11% annualised total-return profile in a successful execution scenario. The downside case is straightforward. If North America volumes remain negative, consumers continue trading down, and the planned price cuts do not generate sufficient additional tonnage, operating leverage will disappoint. In that environment the market can easily compress the forward P/E back toward 16–17x. On a $9–9.5 EPS base, that implies a share price in the $150 area even with underlying earnings progress. The stock is no longer cheap enough to be protected by valuation alone.

Final stance on NASDAQ:PEP – Hold, with better risk–reward on pullbacks

Putting all of this together, NASDAQ:PEP sits in the middle ground. The moat around PFNA and the global distribution network is real, free cash flow generation is strong, the balance sheet carries A+ credit, international units continue to grow in the mid-single digits and investors are being paid a 3.3–3.5% yield with 4–5% annual raises plus a $10B buyback. At the same time the 18% rally in 2026 has already repriced the multiple back to fair value for a high-quality staple, while North America volumes are still negative and a 15% price cut across key categories introduces fresh margin uncertainty. The valuation now assumes that management, under Elliott’s pressure and with a Walmart-trained CFO, will stabilise and then grow North American units, execute the “One North America” integration and scale new health-oriented and energy platforms fast enough to offset changing consumption habits. Based on these numbers and risks, the appropriate call is Hold. For an incremental position, the risk–reward improves materially on a pullback into the mid-$150s, where the forward multiple would compress back toward the high-teens and the yield would move closer to 3.7–4.0%, offering a better entry for a long-term, cash-flow-driven exposure to PepsiCo Stock.

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