While the stock market is riding high on the crest of success, basking in the glory of the S&P 500’s shining records, a different narrative unfolds for consumer staples giant, PepsiCo (NASDAQ: PEP). Despite facing headwinds in their growth trajectory, causing a dip in their organic sales to 4.5% in the last quarter from a robust 9%, the company’s journey towards recovery holds promise yet to be revealed in fiscal 2024.
Navigating the Storm
The market sentiment towards PepsiCo’s slower growth rate finds its root in the shifting consumer behavior post-pandemic, coupled with the pall of inflation, pressuring the sales growth to a modest 4%. However, beneath this tempest lies a sturdy vessel in the form of Pepsi’s resilient business model that can navigate these troubled waters.
A Silver Lining
Despite the challenging scenario, PepsiCo’s earnings surged by 14% last year, outpacing sales growth and hinting at a remarkable ability to increase profit margins. As the company pursues cost-cutting measures and capitalizes on lucrative niches like energy drinks and sparkling waters, the outlook remains positive, with projections pointing towards an 8% increase in earnings and a 4% rise in sales for 2024.
PEP Operating Margin (TTM) data by YCharts
Moreover, with a history of 52 consecutive dividend hikes, PepsiCo’s commitment to rewarding shareholders is unrivaled. The recent 7% boost in dividends has elevated the yield to 3%, adding allure to this investment proposition.
Complementing the dividend allure is the stock’s price – a mere stone’s throw from its 52-week low, offering investors not just immediate income but also the potential for substantial capital appreciation. At a valuation of 2.6 times annual sales, well below its previous standing of over 3 times, PepsiCo presents an enticing opportunity compared to industry peers like Coca-Cola (NYSE: KO).
Although not as profitable as Coca-Cola, PepsiCo’s commitment to driving growth and enhancing margins positions it as a strong contender for resilient returns in the long run.
So, take heed, dear investors. In the midst of obscurity lies an undiscovered jewel in PepsiCo’s down but not out stock. As you contemplate your next move in the market, consider seizing the discounted prices and holding onto this overlooked dividend gem.
Could PepsiCo be the missing piece in your investment puzzle?
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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
