We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can PepsiCo Achieve Its Mid-Teens PBNA Margin Ambition by 2026?
Read MoreHide Full Article
Key Takeaways
PBNA posted 2% y/y organic revenue growth despite a volume drag from shifting its case-pack water business.
PepsiCo is boosting growth via zero-sugar expansion, functional launches and stronger away-from-home reach.
Cost actions, including logistics gains and a 35% SKU reduction, support PepsiCo's margin ambitions.
PepsiCo Inc.’s (PEP - Free Report) flagship U.S.-Canada beverage arm — PepsiCo Beverages North America (“PBNA”) — spans carbonated soft drinks, functional hydration, sports nutrition, modern soda, coffee, tea and away-from-home channels. As one of PepsiCo’s most strategically important businesses, PBNA plays a pivotal role in driving brand equity and profitability. Its scale, innovation pipeline and distribution muscle make it central to PepsiCo’s long-term margin expansion goals.
In third-quarter 2025, PBNA delivered 2% year-over-year organic revenue growth despite a three-point volume drag from the transition of its case-pack water business to a third party. The segment’s third-quarter performance showed renewed momentum in core brands, with Trademark Pepsi posting volume and net revenue gains, fueled by Pepsi Zero Sugar and successful marketing campaigns.
Mountain Dew flavor extensions revived engagement, while poppi delivered more than 50% retail sales growth year to date. Propel continued to scale, on track to exceed $1 billion in annual retail sales, and PBNA also gained share in enhanced water and energy through expanded partnerships, including its new distribution role for Celsius-owned brands.
PepsiCo outlined a robust plan to accelerate PBNA’s growth, expanding zero-sugar offerings, scaling functional innovations like protein-infused beverages and pushing further into away-from-home channels. On the cost side, PBNA is mitigating higher supply-chain expenses through productivity initiatives, improved logistics and SKU reductions. Since 2022, the company has cut more than 35% of SKUs, reducing complexity and sharpening in-market execution.
Given these actions, PBNA appears to be on a credible path toward its mid-teens operating margin ambition. Execution risks remain, particularly inflation in global inputs and consumer price sensitivity, but third-quarter trends and structural initiatives indicate meaningful progress. If innovation traction continues and cost efficiencies scale as planned, PepsiCo has a viable line of sight to achieving its PBNA margin target by 2026.
Are PEP’s Peers: KO & KDP on Track With Their Targets?
PepsiCo’s beverage rivals, The Coca-Cola Company (KO - Free Report) and Monster Beverage Corporation (MNST - Free Report) , each entered 2025 with bold performance goals, but are they executing well enough to stay on track with their targets?
Coca-Cola’s beverage business appears on track with its global growth goals, supported by high-end organic revenue growth, consistent value-share gains and improving execution across markets. Management highlighted resilient demand, strong innovation contributions and expanded operating margins despite currency headwinds. With continued investment in marketing, affordability, premiumization and system capabilities, KO expects to deliver its 2025 guidance and remains confident in achieving long-term commitments.
MNST’s beverage business remains firmly on track with its global growth targets, delivering 16.8% net sales growth and record profits, while international markets climbed to 43% of the total sales, the highest ever for the company. Strong momentum across EMEA, APAC and LatAm, combined with robust innovation, rising household penetration and successful zero-sugar extensions, continues to fuel share gains. Management remains optimistic about sustained category expansion and Monster Beverage’s ability to outperform globally.
PEP’s Price Performance, Valuation & Estimates
Shares of PepsiCo have lost 2.2% in the year-to-date period against the industry’s growth of 8.9%.
Image Source: Zacks Investment Research
From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 17.42X, below the industry’s average of 18.2X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 0.7%, whereas its 2026 earnings estimates indicate growth of 5.9%. The company’s EPS estimates for 2025 have risen by a penny, whereas 2026 estimates have increased 0.2% in the past 30 days.
Image: Bigstock
Can PepsiCo Achieve Its Mid-Teens PBNA Margin Ambition by 2026?
Key Takeaways
PepsiCo Inc.’s (PEP - Free Report) flagship U.S.-Canada beverage arm — PepsiCo Beverages North America (“PBNA”) — spans carbonated soft drinks, functional hydration, sports nutrition, modern soda, coffee, tea and away-from-home channels. As one of PepsiCo’s most strategically important businesses, PBNA plays a pivotal role in driving brand equity and profitability. Its scale, innovation pipeline and distribution muscle make it central to PepsiCo’s long-term margin expansion goals.
In third-quarter 2025, PBNA delivered 2% year-over-year organic revenue growth despite a three-point volume drag from the transition of its case-pack water business to a third party. The segment’s third-quarter performance showed renewed momentum in core brands, with Trademark Pepsi posting volume and net revenue gains, fueled by Pepsi Zero Sugar and successful marketing campaigns.
Mountain Dew flavor extensions revived engagement, while poppi delivered more than 50% retail sales growth year to date. Propel continued to scale, on track to exceed $1 billion in annual retail sales, and PBNA also gained share in enhanced water and energy through expanded partnerships, including its new distribution role for Celsius-owned brands.
PepsiCo outlined a robust plan to accelerate PBNA’s growth, expanding zero-sugar offerings, scaling functional innovations like protein-infused beverages and pushing further into away-from-home channels. On the cost side, PBNA is mitigating higher supply-chain expenses through productivity initiatives, improved logistics and SKU reductions. Since 2022, the company has cut more than 35% of SKUs, reducing complexity and sharpening in-market execution.
Given these actions, PBNA appears to be on a credible path toward its mid-teens operating margin ambition. Execution risks remain, particularly inflation in global inputs and consumer price sensitivity, but third-quarter trends and structural initiatives indicate meaningful progress. If innovation traction continues and cost efficiencies scale as planned, PepsiCo has a viable line of sight to achieving its PBNA margin target by 2026.
Are PEP’s Peers: KO & KDP on Track With Their Targets?
PepsiCo’s beverage rivals, The Coca-Cola Company (KO - Free Report) and Monster Beverage Corporation (MNST - Free Report) , each entered 2025 with bold performance goals, but are they executing well enough to stay on track with their targets?
Coca-Cola’s beverage business appears on track with its global growth goals, supported by high-end organic revenue growth, consistent value-share gains and improving execution across markets. Management highlighted resilient demand, strong innovation contributions and expanded operating margins despite currency headwinds. With continued investment in marketing, affordability, premiumization and system capabilities, KO expects to deliver its 2025 guidance and remains confident in achieving long-term commitments.
MNST’s beverage business remains firmly on track with its global growth targets, delivering 16.8% net sales growth and record profits, while international markets climbed to 43% of the total sales, the highest ever for the company. Strong momentum across EMEA, APAC and LatAm, combined with robust innovation, rising household penetration and successful zero-sugar extensions, continues to fuel share gains. Management remains optimistic about sustained category expansion and Monster Beverage’s ability to outperform globally.
PEP’s Price Performance, Valuation & Estimates
Shares of PepsiCo have lost 2.2% in the year-to-date period against the industry’s growth of 8.9%.
Image Source: Zacks Investment Research
From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 17.42X, below the industry’s average of 18.2X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 0.7%, whereas its 2026 earnings estimates indicate growth of 5.9%. The company’s EPS estimates for 2025 have risen by a penny, whereas 2026 estimates have increased 0.2% in the past 30 days.
Image Source: Zacks Investment Research
PEP currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.