PepsiCo Pre-earnings Analysis
Chart done on daily timeframe. PepsiCo is set to report earnings later this month and expectations are surprisingly low for the first quarter. Despite the company’s ability to surpass its estimates in all four quarters last year, PepsiCo is down in its 52 week period and is struggling to peak investors’ attention. The company took inflation “like a champ” and maintained their streak of year over year revenue and net income growth, but uncertainties around food prices and consumer habits have kept buyers at bay. Being a consumer defensive stock, PEP usually moves in cycles and is slow to get going, but when it catches a rally, it usually goes on for months after. Looking at their numbers and chart position, PEP could be setting up for a rally into earnings and beyond depending on their performance.
As mentioned earlier, analysts have toned down their EPS estimates for the company, which means that an earnings beat alone is not enough. The company needs to surpass estimates by a high percentage and given that it’s the first quarter, they need to lay out strong guidance to intrigue buyers. PepsiCo’s recent deal with Subway may also ignite some attraction to the stock considering it is replacing its biggest rival’s products, Coca-Cola.
With so many sectors already outpacing the market in 2024, value stocks like PepsiCo are just now starting to gain attention. Buyers are looking for deal in a market filled with inflated valuations. Trading at a price to earnings ratio of 25 and offering a 3% dividend yield, PEP could be a top pick heading into earnings and the next quarter.
On the chart, PEP’s daily candle managed to push to retest the trend line that’s been holding it back but failed on the attempt to break it (blue line). This channel down pattern has been developing for nearly a year and historically it leads to bullish breakouts on companies with sound valuations. We’re looking for PEP to defend the 165.00-167.00 level in the coming weeks for it to push and retest the 174.00-176.00 area for a breakout to 180.00-182.00.