PepsiCo Inc. PEP has been under pressure, with its shares declining 9.3% over the past three months. The stock has underperformed the Beverages – Soft Drinks industry’s 3.2% return and the broader Consumer Staples sector’s 2.7% rally. PEP has also lagged the S&P 500’s 3.9% advance in the same period.
PepsiCo’s 3-Month Price Performance
Image Source: Zacks Investment Research
PEP has also trailed several key competitors. Shares of The Coca-Cola Company KO, Primo Brands Corporation PRMB and Monster Beverage Corporation MNST have gained 8.6%, 6.5% and 0.5%, respectively, over the past three months.
At its current price of $137.73, PEP trades 19.7% below its 52-week high of $171.48 and just 3% above its 52-week low of $133.73. Adding to the bearish setup, PEP remains below both its 50-day and 200-day moving averages, signaling persistent weakness in its near- and long-term price trends.
PEP Stock Trades Below 50-Day & 200-Day Moving Averages
Image Source: Zacks Investment Research
What is taking the fizz out of PepsiCo’s stock? Let us delve into the key headwinds weighing on PEP’s performance and assess whether a turnaround could be on the horizon.
What’s Weighing on PEP’s Performance?
PepsiCo’s performance remains pressured by softness in North America, cautious consumer spending, margin headwinds and persistent cost inflation. While the company delivered solid global volume growth in the second quarter of 2026, U.S. food and beverage category trends moderated as rising inflationary pressures tightened consumer budgets. Management noted that North America performed below expectations and anticipates a more gradual improvement in business trends through the remainder of 2026.
The weakness was particularly evident in PepsiCo Beverages North America (“PBNA”). Although PBNA’s net revenues increased 7%, acquisitions net of divestitures contributed six percentage points to growth, while organic revenues rose just 1%. More concerning, organic volumes declined 4%, partly reflecting a headwind related to the company’s case-pack water business and its transition to a third-party partner. Meanwhile, PepsiCo Foods North America (“PFNA”) posted a 2% decline in net revenues due to lower effective net pricing.
Margin pressure adds another concern. PepsiCo’s core operating margin contracted 40 basis points in the second quarter, as productivity savings and effective net pricing were partly offset by higher operating costs. North American margins were hurt by affordability investments in convenient foods and unfavorable volume and channel mix in beverages.
Moreover, PepsiCo expects higher input-cost inflation in the second half of 2026, while continuing to invest in affordability, portfolio innovation, advertising and marketing. Although productivity savings should cushion some of these pressures, the combination of sluggish North American demand, elevated costs and stepped-up investments could keep near-term earnings momentum under pressure.
PepsiCo’s Estimate Revision Trend
The Zacks Consensus Estimate for PEP’s 2026 and 2027 EPS inched down 0.6% and 1.1%, respectively, in the past 30 days. The downward revision in earnings estimates indicates that analysts are losing confidence in the company’s growth potential.
The Zacks Consensus Estimate for PEP’s 2026 sales and EPS suggests year-over-year growth of 5.4% and 5.3%, respectively. For 2027, the Zacks Consensus Estimate for PepsiCo’s sales and EPS implies 3% and 4.9% year-over-year growth, respectively.
Image Source: Zacks Investment Research
PEP’s Valuation
PepsiCo is currently trading at a forward 12-month P/E multiple of 15.6X, below the industry average of 19.48X and the S&P 500’s average of 20.8X.
At 15.6X P/E, PEP is trading at a valuation much lower than its competitors, such as Coca-Cola, Primo Brands and Monster Beverage, which are delivering solid growth and trade at higher multiples. Coca-Cola, Primo Brands and Monster Beverage have forward 12-month P/E ratios of 25.34X, 16.8X and 36.33X, respectively.
Image Source: Zacks Investment Research
Should Investors Stay Wary of PEP Stock?
PepsiCo’s strong global brands, diversified portfolio and defensive business model support its long-term appeal. However, near-term fundamentals remain pressured by weak North American demand, softer beverage volumes and cautious consumer spending. Higher input costs and continued investments in brands, productivity and capabilities may also weigh on margins.
Earnings momentum remains subdued as analysts have turned more cautious about the company’s outlook. Although PepsiCo’s valuation looks attractive relative to the broader market and several peers, the discount reflects modest growth expectations and ongoing operating challenges.
Improving volumes, stronger cost management and better margin trends will be the key to rebuilding investor confidence. Until PepsiCo shows clearer signs of sustained fundamental recovery, investors may prefer to remain cautious on this Zacks Rank #4 (Sell) stock.
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