After six weeks of consecutive declines, is a turning point ahead? Goldman Sachs bets on PepsiCo (PEP.US) for "ten years of growth," optimistic about the resilience of leading consumer companies amid inflation headwinds

According to Zhitong Finance APP, PepsiCo (PEP.US) is likely to reverse its six-week streak of declining share prices. Although Goldman Sachs has lowered its target price for this American beverage, food, and snack giant, it has maintained its most optimistic "Buy" rating. Improved third-quarter sales and broadly better operational performance, as well as growth potential over the next decade, support the optimistic outlook; meanwhile, rising costs, pressure on profit margins, and continued significant challenges in beverage business execution are dragging down short-term profitability.

As of Thursday's close in the U.S. stock market, PepsiCo shares rose 3.73% to near $128, up nearly 2% for the week so far, with its market value lingering around $175 billion. PepsiCo shares have fallen about 10% year-to-date. Based on Thursday’s closing price, Goldman Sachs’ latest target price, even after being lowered, still implies a robust potential upside of about 28.6%.

PepsiCo is at a turning point, experiencing sales improvement and profit pressure simultaneously. Third-quarter organic sales grew by 3.1%, exceeding the market consensus estimate of about 2.9%, and also surpassing the previous quarter's 2.4%; however, rising costs, an unfavorable product sales mix, and underperformance in the North American beverage business forced the company to unexpectedly lower its full-year profit growth guidance.

The core contradiction revealed in PepsiCo’s latest quarterly financial report released on Thursday is that revenue growth has not yet fully translated into profit growth: third-quarter revenue was $25.274 billion, up 5.6% year-on-year; core earnings per share were $2.34, up 2% year-on-year; core operating margin fell by 35 basis points to 16.9%. The company narrowed its full-year organic sales growth guidance from 2%–4% to about 3%, maintaining the midpoint of the original range, but lowered its fixed exchange rate core EPS growth expectation from the previously forecast 4%–6% range to 1%–2%. This means that demand recovery has emerged, but costs, marketing investments, and sales mix are eating up the additional income gained.

PepsiCo Expected to End Six-Week Decline! Goldman Sachs Lowers Target Price but Remains Bullish on "Decade of Growth"

Goldman Sachs analyst Bonnie Herzog cut the target price for PepsiCo from $180 to $165, but reiterated a "Buy" recommendation. Relative to the most recent closing price, this target implies around 28% upside. PepsiCo’s third-quarter organic sales rose 3.1%, beating the consensus estimate of 2.9% and last quarter’s 2.4%, sending a positive signal about the company’s sales growth performance.

Goldman Sachs believes that PepsiCo is likely to achieve mid-single-digit annual organic sales growth over the next decade. This long-term view suggests that as the company gradually resolves current operational challenges, growth momentum is likely to further strengthen.

Currently, PepsiCo expects organic sales growth of around 3% for fiscal year 2026, with the previous range being 2%–4%. Management also lowered the fixed exchange-rate EPS growth forecast to 1%–2%; the previous range was 4%–6%, and actual growth is expected to be near the low end of the range.

On the third-quarter earnings call, PepsiCo’s Chief Financial Officer Hugh Johnston said the company is increasing investment to drive sales but also warned of rising costs. The CFO noted in the earnings call that the company currently faces rising costs, an unfavorable sales mix, and operational execution issues.

"Margin performance is below our expectations. Input costs are rising, and the sales mix in particular has become a drag."

PepsiCo plans to continue funding key business initiatives. Johnston said that advertising and marketing expenditures have increased in both North America and international markets.

PepsiCo CEO Ramon Laguarta stated that volume growth was below the company’s initial expectations, reflecting both a challenging consumer environment and executional shortcomings.

"Currently, we are not satisfied with the performance of our beverage business. As we mentioned in our results explanation, we are competitive in areas such as hydration and energy drinks, but are underperforming in the carbonated soft drink sector. Therefore, we are urgently shifting focus to improve the performance of our carbonated soft drinks."

PepsiCo is reviewing expenditures throughout the organization, including headquarters management and centralized allocation costs. Laguarta stated that the funds saved will be allocated to support investments in the beverage business and North American food operations.

On the Stocktwits retail investor platform, the sentiment around PepsiCo shares has eased from “extremely bullish” to “bullish.”

One retail investor commented: "Started a small position today. I like this stock for its dividend."

Another retail investor said: "Despite a harsh current environment, the company has achieved strong profits and mid-to-high single-digit revenue growth, yet the stock is still being sold off. This makes no sense. With tariffs and high energy prices driving revenue growth, how much lower can the stock go, and for how long? I don’t know. All I can do is buy on dips."

Sales Recovery Meets Cost Headwinds: PepsiCo's Share Price Rebound Relies on Profit Realization

Goldman Sachs lowered its target price from $180 to $165, while maintaining a "Buy" rating, seeing mid-single-digit annual organic sales growth for PepsiCo over the next decade—the latest two judgments correspond to different time horizons: short-term profit recovery is slower than expected, but the long-term brand and channel value remain recognized.

For investors, Goldman’s "Buy" call equates to a comprehensive bet on brand recovery, international growth, and sustained cash returns; the key validation for sustained share price revaluation remains whether North American operations can deliver on the pathway of "volume recovery—sales mix improvement—margin rebound."

In addition to revenue growth not yet fully converting to profit growth, stark internal differentiation exists within PepsiCo’s business. In the third quarter, international business organic revenue grew 8%, core operating profit increased 16%, and core operating margin rose by 105 basis points; North American food and beverage organic revenues slightly declined, with core food operating profit margin dropping 280 basis points. Overseas expansion sustains group growth, while the North American market needs to both revive consumer buying intent and strengthen brand competitiveness. Therefore, PepsiCo’s investment value depends on whether international growth is sustainable and whether North American volume recovery can gradually reduce the drag on margins from promotions and marketing investments.

The most critical incremental information from PepsiCo's earnings call is that cost pressures are being released with a lag. CFO Hugh Johnston explained that the company’s purchasing hedges typically cover 6–12 months, previously buffering some cost increases; as these hedges gradually expire, higher input costs are now hitting the income statement. Meanwhile, tariff rebates received by the North American beverage segment in Q3 will not recur in Q4, creating further margin pressure.

This marked change occurs amid persistent energy inflation: in the U.S., August CPI rose 0.4% month-on-month, higher than July’s 0.1%; energy prices rose 16.3% year-on-year. Higher energy costs both raise transportation and production expenses for food and beverage companies and squeeze consumers’ budgets for snacks and drinks, making it difficult for companies to fully offset costs through price hikes.

The management response focuses on reducing headquarters and non-growth expenses while continuing to invest in the brand, marketing, and sales execution. CEO Laguarta explicitly stated that hydration and energy drink segments are performing well, but competition in carbonated soft drinks is lacking; brands such as Pepsi, Mountain Dew, and Poppi need further investment and enhanced in-store execution. The company is partnering with Publicis Groupe to use more granular consumer data to boost marketing ROI. The crux of the operational recovery is whether incremental marketing spending can drive sustained repeat purchases, volume growth, and improved product mix. Only if these measures more than offset the increased costs will revenue recovery translate into a sustainable margin rebound.

Shareholder returns provide additional support to the long-term investment thesis. PepsiCo maintains its $8.9 billion full-year cash return plan, including $7.9 billion in dividends and $1 billion in share repurchases. The company will raise its annual dividend for the 54th consecutive year in 2026, and the current annualized per-share dividend is $5.92; based on the closing price on October 8, the dividend yield is about 4.61%.