PepsiCo Q2 Earnings Preview: Buy, Hold or Sell the Stock?

PepsiCo, Inc. PEP is expected to register top and bottom-line growth when it reports second-quarter 2026 numbers on July 9, before the opening bell.The Zacks Consensus Estimate for second-quarter revenues is pegged at $23.9 billion, implying 5% growth from the year-ago quarter's reported figure. For quarterly earnings, the consensus mark is pegged at $2.19, suggesting 3.3% growth from the $2.12 reported in the prior-year quarter. The consensus mark for earnings has been unchanged in the past 30 days.In the last reported quarter, the company registered an earnings surprise of 4.6%. It has delivered an earnings surprise of 2.7%, on average, in the trailing four quarters.PepsiCo, Inc. Price and EPS Surprise PepsiCo, Inc. price-eps-surprise | PepsiCo, Inc. QuotePEP's Earnings WhispersOur proven model does not conclusively predict an earnings beat for PepsiCo this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.PepsiCo currently has a Zacks Rank #4 (Sell) and an Earnings ESP of -0.39%.You can see the complete list of today’s Zacks #1 Rank stocks here.What to Look for in PEP’s Q2 Earnings ReleasePepsiCo entered the second quarter with several operational priorities that investors are watching closely, particularly whether improving sales trends could translate into stronger profitability.In PepsiCo Foods North America (“PFNA”), the company has been investing in affordability, innovation and marketing to strengthen demand across its snack portfolio. While these initiatives have helped stabilize volumes, they have also weighed on the margins, suggesting profitability could remain under pressure until the benefits of higher commercial spending become more visible. In the second-quarter release, investors are expected to look for signs that the revenue momentum is increasingly flowing through to earnings.Within PepsiCo Beverages North America (“PBNA”), attention is likely to be centered on underlying volume trends. The first quarter reflected disruption from the transition of the case-pack water business, while reported growth benefited from portfolio actions, including acquisitions. As new products such as Pepsi Prebiotic, Gatorade Lower Sugar and other functional beverages gain wider distribution, investors are anticipated to look for evidence that organic demand has been strengthening and helping offset the lingering impacts of portfolio transitions.Our model predicts revenues to increase 2% year over year for PFNA, 4% for PBNA and Latin America, 8% for the International Beverages Franchise segment, 9% for EMEA, and 7% for the Asia-Pacific Foods segment in the second quarter of 2026.Another important focus is likely to be inflation and tariff-related cost pressures. Although PepsiCo continues to benefit from commodity hedging and disciplined pricing, uncertainty surrounding raw material, packaging and supply-chain costs is expected to have influenced the gross margin and pricing decisions throughout the quarter.Productivity has remained central to PepsiCo's earnings story. The company has been relying on cost-saving initiatives to fund higher brand investments while protecting margins. Investors are expected to closely monitor whether productivity gains have continued to offset inflationary pressures and increased marketing spend. A solid balance between volume recovery, disciplined cost management and sustained innovation will likely determine whether PepsiCo can build on its improving momentum and remain on track to achieve its full-year financial objectives.Price Performance & ValuationPEP shares have exhibited a strong performance in the past three months. The stock has declined 8% against the broader industry and the Consumer Staples sector’s growth of 5.8% and 4.8%, respectively. PepsiCo’s stock has also underperformed the S&P 500 index’s growth of 13.8% in the same period.PEP Stock’s 3-Month PerformanceImage Source: Zacks Investment ResearchAt the current stock price of $144.22, PepsiCo trades 8.5% above its 52-week low mark of $132.96 and 15.9% below its 52-week high of $171.48.The PEP stock has underperformed its peers, The Coca-Cola Company KO, Monster Beverage Corporation MNST and Keurig Dr Pepper Inc. KDP, which have risen 9%, 31.6% and 29.6%, respectively, in the past three months.PepsiCo is trading at a forward P/E ratio of 16.27X, below the S&P 500’s average of 20.8X and the broader industry’s average of 19.29X. PEP’s forward 12-month P/E valuation shows a notable discount to the broader market. Image Source: Zacks Investment ResearchPepsiCo’s Investment ThesisPEP has consistently delivered revenue growth and strong profitability, driven by its diverse product portfolio and global presence. Investments in brands, distribution systems, supply chains, and manufacturing and digital capabilities strengthen its long-term growth potential.Despite its solid financial performance and strategic initiatives, industry dynamics and external risks warrant a cautious investment outlook. Inflationary pressures, operational challenges in North America and shifting consumer behavior have been hurting PEP’s performance. Recent market data suggests bleak prospects for near-term recovery in its North America business.ConclusionPepsiCo enters its second-quarter earnings release with a mix of opportunities and challenges. The company continues to benefit from its diversified portfolio, global scale and ongoing investments in innovation, affordability and productivity, which should support long-term growth. However, near-term headwinds, including margin pressure from higher commercial spending, lingering volume disruptions in North America, tariff-related cost uncertainty and a cautious consumer environment, remain key areas of concern.While management has reaffirmed its full-year outlook, investors will be looking for stronger evidence that volume recovery, productivity gains and pricing actions are translating into improved profitability. Although the stock trades at a valuation discount to the broader market, its recent underperformance relative to peers reflects lingering concerns about the pace of its operational recovery. Investors may prefer to remain on the sidelines until clearer signs of sustained improvement emerge in its core North American business.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. 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