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PepsiCo Lowers 2026 EPS Outlook as North America Pressures Margins
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Key Takeaways
PepsiCo cuts its 2026 core EPS growth outlook to 2.5-3.5% as North American margin pressures persist.
Foods North America's core operating margin fell 280 bps, while Beverages North America's declined 15 bps.
International organic revenues grew 8% in Q3, with core operating profit up 16% and margins expanding 105 bps.
PepsiCo, Inc. (PEP - Free Report) reset its 2026 earnings outlook after third-quarter 2026 results showed resilient revenue growth but continued pressure on North American profitability. The company now expects slower core earnings growth even as international operations remain a meaningful source of momentum.
The investment question is whether margin weakness at home can ease fast enough for productivity savings and overseas growth to support a stronger earnings trajectory.
PepsiCo's 2026 EPS Outlook Moves Lower
PepsiCo cut its fiscal 2026 core constant-currency EPS growth outlook to 1-2% from its prior expectation at the low end of 4-6%. Core EPS growth guidance was also reduced to 2.5-3.5% from the previously indicated low end of 5-7%.
The revision reflects a tougher earnings setup despite approximately 3% expected organic revenue growth and roughly 6% projected net revenue growth for the year. Core EPS increased 2% in the third quarter, while core constant-currency EPS rose 1.5%.
PepsiCo Foods North America's core operating margin declined 280 basis points in the third quarter. Affordability investments, higher advertising and marketing spending and the absence of a prior-year asset-sale gain weighed on profitability, partly offset by productivity savings and higher organic volume.
PepsiCo Beverages North America's core operating margin fell 15 basis points as volume and channel mix pressure and higher marketing spending offset tariff refunds, pricing and productivity benefits. The Coca-Cola Company (KO - Free Report) offers a useful contrast, with third-quarter comparable operating margin expanding to 32.9% from 31.9% as organic revenues grew 7%.
PepsiCo's International Business Offers an Offset
International organic revenues increased 8% in the third quarter, marking the 22nd consecutive quarter of at least mid-single-digit growth. International core operating profit rose 16%, while core operating margin expanded 105 basis points.
The contribution is becoming more important to PepsiCo's earnings mix. International operations accounted for 41% of year-to-date net revenues and 45% of core segment operating profit. Keurig Dr Pepper Inc. (KDP - Free Report) also showed that beverage growth remains available, with U.S. Refreshment Beverages net sales up 10.9% in its third quarter.
PEP's Productivity Push Must Carry More Weight
PepsiCo's core operating profit increased 3% in the third quarter as productivity savings, effective net pricing and $178 million in tariff refunds supported results. Those benefits were partly offset by operating cost inflation and higher advertising and marketing investments.
Management is identifying additional structural cost reductions, including lower corporate costs and reduced discretionary spending. These actions will complement automation, network optimization, digitalization and simplification efforts as PepsiCo works to fund growth investments and offset inflation.
PepsiCo's Signals Reflect the Guidance Risk
The lowered earnings outlook leaves execution at the center of the near-term investment case. International growth and productivity initiatives provide offsets, but North American margin pressure is expected to persist in the fourth quarter, limiting visibility on a faster earnings recovery.
PEP currently carries a Zacks Rank #4 (Sell). It has a Growth Score of B, Momentum Score of B and VGM Score of B, while its Value Score is D. The favorable Growth and Momentum scores offer some support, but Style Scores are designed to complement the Zacks Rank, not override it.
The current-fiscal-year earnings estimate has moved 1.7% lower over the past four weeks. Combined with the reduced 2026 earnings outlook, that revision trend supports a cautious near-term view until margins stabilize and earnings expectations improve.
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PepsiCo Lowers 2026 EPS Outlook as North America Pressures Margins
Key Takeaways
PepsiCo, Inc. (PEP - Free Report) reset its 2026 earnings outlook after third-quarter 2026 results showed resilient revenue growth but continued pressure on North American profitability. The company now expects slower core earnings growth even as international operations remain a meaningful source of momentum.
The investment question is whether margin weakness at home can ease fast enough for productivity savings and overseas growth to support a stronger earnings trajectory.
PepsiCo's 2026 EPS Outlook Moves Lower
PepsiCo cut its fiscal 2026 core constant-currency EPS growth outlook to 1-2% from its prior expectation at the low end of 4-6%. Core EPS growth guidance was also reduced to 2.5-3.5% from the previously indicated low end of 5-7%.
The revision reflects a tougher earnings setup despite approximately 3% expected organic revenue growth and roughly 6% projected net revenue growth for the year. Core EPS increased 2% in the third quarter, while core constant-currency EPS rose 1.5%.
PepsiCo, Inc. Price, Consensus and EPS Surprise
PepsiCo, Inc. price-consensus-eps-surprise-chart | PepsiCo, Inc. Quote
PEP's North American Margins Stay Under Strain
PepsiCo Foods North America's core operating margin declined 280 basis points in the third quarter. Affordability investments, higher advertising and marketing spending and the absence of a prior-year asset-sale gain weighed on profitability, partly offset by productivity savings and higher organic volume.
PepsiCo Beverages North America's core operating margin fell 15 basis points as volume and channel mix pressure and higher marketing spending offset tariff refunds, pricing and productivity benefits. The Coca-Cola Company (KO - Free Report) offers a useful contrast, with third-quarter comparable operating margin expanding to 32.9% from 31.9% as organic revenues grew 7%.
PepsiCo's International Business Offers an Offset
International organic revenues increased 8% in the third quarter, marking the 22nd consecutive quarter of at least mid-single-digit growth. International core operating profit rose 16%, while core operating margin expanded 105 basis points.
The contribution is becoming more important to PepsiCo's earnings mix. International operations accounted for 41% of year-to-date net revenues and 45% of core segment operating profit. Keurig Dr Pepper Inc. (KDP - Free Report) also showed that beverage growth remains available, with U.S. Refreshment Beverages net sales up 10.9% in its third quarter.
PEP's Productivity Push Must Carry More Weight
PepsiCo's core operating profit increased 3% in the third quarter as productivity savings, effective net pricing and $178 million in tariff refunds supported results. Those benefits were partly offset by operating cost inflation and higher advertising and marketing investments.
Management is identifying additional structural cost reductions, including lower corporate costs and reduced discretionary spending. These actions will complement automation, network optimization, digitalization and simplification efforts as PepsiCo works to fund growth investments and offset inflation.
PepsiCo's Signals Reflect the Guidance Risk
The lowered earnings outlook leaves execution at the center of the near-term investment case. International growth and productivity initiatives provide offsets, but North American margin pressure is expected to persist in the fourth quarter, limiting visibility on a faster earnings recovery.
PEP currently carries a Zacks Rank #4 (Sell). It has a Growth Score of B, Momentum Score of B and VGM Score of B, while its Value Score is D. The favorable Growth and Momentum scores offer some support, but Style Scores are designed to complement the Zacks Rank, not override it.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The current-fiscal-year earnings estimate has moved 1.7% lower over the past four weeks. Combined with the reduced 2026 earnings outlook, that revision trend supports a cautious near-term view until margins stabilize and earnings expectations improve.