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Will Currency & Tariff Pressures Derail PepsiCo's Flat EPS Target?
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Key Takeaways
PepsiCo faces FX and tariff pressures while aiming to keep core constant-currency EPS roughly flat.
PepsiCo cites a 0.5-point FX drag and a three-point tariff headwind squeezing margins.
PepsiCo is streamlining SKUs and boosting automation to offset rising costs and protect margins.
PepsiCo, Inc. (PEP - Free Report) enters the final stretch of 2025 facing two major external headwinds: currency volatility and rising tariff-related costs. Despite strong execution across international markets and improving trends in North America, these pressures continue to weigh on profit conversion. Management has reiterated its expectation for core constant-currency EPS to remain roughly flat year over year, but achieving this target will require navigating a tough macro backdrop, where foreign-exchange swings and cost inflation remain unpredictable. The company’s ability to offset these challenges will determine whether it can hold the line on earnings while advancing its long-term growth priorities.
Currency remains a key drag on results, especially given PepsiCo’s large and diversified global footprint. In its latest outlook, the company noted that currency translation is expected to negatively impact both reported revenues and core EPS by about 0.5 percentage points. While this is an improvement from earlier expectations, it still represents a meaningful obstacle that erodes profit gains generated in local markets. In addition, tariff impacts and the rising cost of sourcing certain global inputs created a three-percentage-point headwind in the most recent quarter, putting added pressure on margins and limiting the benefit of pricing actions and productivity savings.
To defend its EPS target, PepsiCo is pushing hard on cost cuts, smarter sourcing and tighter revenue management. The company is streamlining SKUs, optimizing its manufacturing and distribution network and increasing automation to offset higher operating costs. These efforts, along with disciplined pricing, are designed to protect margins. Ultimately, PepsiCo’s ability to deliver flat EPS in 2025 depends on whether these internal actions can fully counter ongoing currency and tariff pressures.
KO & KDP: Navigating Currency & Tariff Headwinds
Both The Coca-Cola Company (KO - Free Report) and Keurig Dr Pepper Inc. (KDP - Free Report) are feeling the impact of currency movements and tariff-related costs, though the scale and drivers differ based on their geographic footprints and supply-chain structures.
Coca-Cola continues to face noticeable currency pressure due to its extensive global footprint, with earnings translation affected in several key emerging and developed markets. FX volatility has the potential to dilute the benefits of strong organic revenue growth and margin expansion, as currency swings reduce the value of international profits when converted back to U.S. dollars. While Coca-Cola is less exposed to tariff-related cost spikes than companies with heavier commodity or manufacturing footprints, it still faces higher import costs for certain ingredients and packaging materials in select regions. The company is countering these headwinds through disciplined pricing, productivity initiatives and geographic diversification, but FX remains a persistent drag on reported results.
Keurig’s exposure to currency pressures is more limited than Coca-Cola’s due to its heavier concentration in North America, but it is not entirely insulated. Currency fluctuations can affect its international businesses and certain imported inputs. Tariff-related pressures pose a more direct challenge for KDP, especially in packaging, aluminum and certain commodities that remain sensitive to trade policy changes. These costs have contributed to margin pressure in recent quarters despite gains from productivity initiatives. KDP is working to offset these headwinds through pricing, supply-chain efficiencies and hedging strategies, but tariff-linked inflation and selective currency impacts still pose risks to its reported profitability.
PEP’s Price Performance, Valuation & Estimates
Shares of PepsiCo have lost 1.2% in the past three months against the industry’s growth of 2.6%.
Image Source: Zacks Investment Research
From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 17.15X, slightly below the industry’s average of 18.07X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 0.7%, whereas the same for 2026 earnings indicates growth of 5.9%. The company’s EPS estimates for 2025 and 2026 have remained stable in the past seven days.
Image: Bigstock
Will Currency & Tariff Pressures Derail PepsiCo's Flat EPS Target?
Key Takeaways
PepsiCo, Inc. (PEP - Free Report) enters the final stretch of 2025 facing two major external headwinds: currency volatility and rising tariff-related costs. Despite strong execution across international markets and improving trends in North America, these pressures continue to weigh on profit conversion. Management has reiterated its expectation for core constant-currency EPS to remain roughly flat year over year, but achieving this target will require navigating a tough macro backdrop, where foreign-exchange swings and cost inflation remain unpredictable. The company’s ability to offset these challenges will determine whether it can hold the line on earnings while advancing its long-term growth priorities.
Currency remains a key drag on results, especially given PepsiCo’s large and diversified global footprint. In its latest outlook, the company noted that currency translation is expected to negatively impact both reported revenues and core EPS by about 0.5 percentage points. While this is an improvement from earlier expectations, it still represents a meaningful obstacle that erodes profit gains generated in local markets. In addition, tariff impacts and the rising cost of sourcing certain global inputs created a three-percentage-point headwind in the most recent quarter, putting added pressure on margins and limiting the benefit of pricing actions and productivity savings.
To defend its EPS target, PepsiCo is pushing hard on cost cuts, smarter sourcing and tighter revenue management. The company is streamlining SKUs, optimizing its manufacturing and distribution network and increasing automation to offset higher operating costs. These efforts, along with disciplined pricing, are designed to protect margins. Ultimately, PepsiCo’s ability to deliver flat EPS in 2025 depends on whether these internal actions can fully counter ongoing currency and tariff pressures.
KO & KDP: Navigating Currency & Tariff Headwinds
Both The Coca-Cola Company (KO - Free Report) and Keurig Dr Pepper Inc. (KDP - Free Report) are feeling the impact of currency movements and tariff-related costs, though the scale and drivers differ based on their geographic footprints and supply-chain structures.
Coca-Cola continues to face noticeable currency pressure due to its extensive global footprint, with earnings translation affected in several key emerging and developed markets. FX volatility has the potential to dilute the benefits of strong organic revenue growth and margin expansion, as currency swings reduce the value of international profits when converted back to U.S. dollars. While Coca-Cola is less exposed to tariff-related cost spikes than companies with heavier commodity or manufacturing footprints, it still faces higher import costs for certain ingredients and packaging materials in select regions. The company is countering these headwinds through disciplined pricing, productivity initiatives and geographic diversification, but FX remains a persistent drag on reported results.
Keurig’s exposure to currency pressures is more limited than Coca-Cola’s due to its heavier concentration in North America, but it is not entirely insulated. Currency fluctuations can affect its international businesses and certain imported inputs. Tariff-related pressures pose a more direct challenge for KDP, especially in packaging, aluminum and certain commodities that remain sensitive to trade policy changes. These costs have contributed to margin pressure in recent quarters despite gains from productivity initiatives. KDP is working to offset these headwinds through pricing, supply-chain efficiencies and hedging strategies, but tariff-linked inflation and selective currency impacts still pose risks to its reported profitability.
PEP’s Price Performance, Valuation & Estimates
Shares of PepsiCo have lost 1.2% in the past three months against the industry’s growth of 2.6%.
Image Source: Zacks Investment Research
From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 17.15X, slightly below the industry’s average of 18.07X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 0.7%, whereas the same for 2026 earnings indicates growth of 5.9%. The company’s EPS estimates for 2025 and 2026 have remained stable in the past seven days.
Image Source: Zacks Investment Research
PEP stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.