Beverage and snack giant PepsiCo Inc. (PEP) is trading marginally higher in Tuesday morning’s session after the company reported third-quarter earnings that beat the analyst consensus.

The company grew revenue from $21.971 billion to $23.453 billion while surpassing the FactSet consensus of $23.413 billion. The bottom line grew too, though. Net income climbed to $3.092 billion from $2.702 billion this time last year. Meanwhile, core earnings per share of $2.25 beat the consensus of $2.15.

CEO Ramon Laguarta said that the team is beyond pleased with the results for this quarter. He attributed success to the company’s ability to remain agile and resilient across geographies and categories in an evolving and dynamic environment.

The biggest food drivers of growth included Frito-Lay North America (7%) and Quaker Foods North America (5%). But, PepsiCo Beverages in North America pulled the weight at home and abroad, with growth of 21% in Latin America.

PepsiCo Inc. does expect this growth to continue into the final quarter of the year, too. The previous EPS guidance of $7.47 has been raised to $7.54. 

Looking even further ahead to fiscal 2024, the company is confident it will deliver results towards the upper end of its long-term targets – both for organic revenue and core constant currency EPS growth.

While the stock has fallen more than 11% year to date, this could be the turning point. So, should you buy PEP? Not so fast. We’ve taken a look through the VectorVest stock analyzer and uncovered 3 reasons to hold off doing anything with this stock for the time being…

PEP Has Just Fair Upside Potential, Safety, and Timing

VectorVest simplifies your trading strategy through a proprietary stock-rating system. You’re given clear, actionable insights in just 3 ratings: relative value (RV), relative safety (RS), and relative timing (RT).

Each rating sits on a scale of 0.00-2.00, with 1.00 being the average. This makes interpretation quick and easy - but it gets even better. You’re given a clear buy, sell, or hold recommendation for any given stock, at any given time. That being said, here’s what we found for PEP:

  • Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (based on a 3-year projection) to AAA corporate bond rates and risk. This offers far superior insights than a simple comparison of price to value alone. As for PEP, the RV rating of 0.97 is just below the average but deemed fair nonetheless. The stock is overvalued though, with a current value of just $123.53.
  • Fair Safety: The RS rating is an indicator of risk. It’s calculated through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity. Right now, PEP has a fair RS rating of 0.99 - again, just below the average.
  • Fair Timing: While the tide may be turning, PEP has been on the decline for quite some time. As a result, the RT rating is a ways below the average at 0.87 - but still considered fair. This rating is based on the direction, dynamics, and magnitude of a stock’s price movement day over day, week over week, quarter over quarter, and year over year.

The overall VST rating of 0.94 is considered fair for PEP - but what does that mean for current investors or those looking to trade the stock? VectorVest has placed a hold recommendation on this stock for the time being. Get a free stock analysis to learn more!

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VectorVest advocates buying safe, undervalued stocks, rising in price. Despite an impressive earnings beat and upbeat forecast, PEP’s upside potential, safety, and timing are just fair right now. The stock has climbed 2% so far in today’s trading session, but will need to form a more meaningful price trend to earn a buy recommendation.

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