Second-quarter revenue reached $24.2 billion, up 6.4% year over year and slightly above consensus. Adjusted earnings per share of $2.20 missed estimates, and the company flagged a 1.5% foreign-exchange headwind for the full year. Shares fell 3.3% on the release and have lagged the S&P 500 by a wide margin over the past year.
The payout ratio presents a tension. On core earnings, the $5.92 dividend consumes roughly 90% of FY2025 core EPS of $8.14. On a free-cash-flow basis, the coverage was essentially 100% in FY2025 and exceeded 100% in the prior two years. However, Q1 2026 core EPS beat expectations by 4% and net income surged 84% year over year, suggesting the denominator may be expanding. Analysts hold a Moderate Buy consensus with a mean price target of $155.09, implying about 12% upside from current levels.
Institutional flows have been mixed. Professional Advisory Services increased its stake 17% in the second quarter, while other large holders have rotated. The stock trades at roughly 16 times forward earnings, a discount to its five-year median near 22 times. Whether the international momentum can offset domestic stagnation and justify the payout trajectory remains the central question for income investors.
Can PepsiCo's overseas growth sustain a dividend that now absorbs nearly all core earnings while the North American engine sputters?
Sources: Source 1 · Source 2 · Source 3 · Source 4 · Source 5 · Source 6
