PepsiCo (NASDAQ:PEP) is expected to release its second-quarter earnings this week. Last quarter, for the period up until March 20, the company posted net revenue growth of 6.8%. It was a strong performance for the company as the only major segments that didn’t generate positive year-over-year growth were Latin America and Europe. Its Frito-Lay division in North America grew by 4% and sales related to PepsiCo Beverages were up 5%.
Year to date, PepsiCo’s stock has been underwhelming, rising less than 1% in value. However, that’s still better than rival Coca-Cola (NYSE:KO), which has been down 1% over the same time frame.
With the economy opening back up and stores and restaurants getting busier, demand for PepsiCo’s products should be on the rise and the company could be due for a good performance in Q2. PepsiCo has a great track record of beating analyst expectations for both earnings and revenue over the past 10 quarters, normally posting positive surprises.
However, that doesn’t necessarily mean you should expect to see the stock price go through the roof. During the past 10 earnings reports, on average, the company’s 5-day return (after earnings) has been around 1% — and that’s on strong results. PepsiCo is a solid investment to hold for the long term, especially with its dividend that yields 2.9%, but it isn’t a growth stock that’s likely to surge on a good earnings beat.
Currently, the stock is trading at a forward price-to-earnings multiple of around 25 – which is high for a company that is generating single-digit growth. And so unless analysts expect a much bigger surge in profits for the next year, I wouldn’t expect PepsiCo’s stock to rise a whole lot higher from where it is right now.