PepsiCo, Inc.’s PEP second-quarter 2025 performance reveals a company at the crossroads of leveraging pricing power while wrestling with volume pressures, particularly in North America. The beverage and snack giant beat expectations with earnings per share (EPS) of $2.12 and revenues of $22.73 billion in the quarter under discussion, while volume softness across several segments remained a concern.
To counter declining volumes, PepsiCo has leaned heavily into strategic pricing and value-creation efforts. The company is focusing on granular investments in affordability entry points, everyday low pricing and value packs to retain consumers amid a moderating demand environment. This pricing discipline has enabled top-line growth despite softer underlying consumption trends.
A key driver of resilience is PepsiCo's multi-layered productivity strategy, leveraging AI, ERP upgrades and North America integration to drive cost savings. The company expects a 70% increase in productivity in the second half of 2025, largely from Frito-Lay. Plant closures and fixed-cost reductions have supported margins and freed up funds for investment in innovation and value offerings. However, despite stable margins, sluggish volume growth raises concerns about long-term brand strength and category leadership.
PepsiCo remains confident that its pricing-led strategy will not only sustain profitability but also position it for a rebound in volumes. Relaunching core brands such as Lay’s and Tostitos with cleaner labels, expanding the permissible snacking portfolio and increasing focus on away-from-home consumption are expected to reignite consumer engagement. With consistent international growth and improving U.S. market competitiveness, the company is betting that its balanced approach, pricing precision, operational discipline and brand innovation will help it return to its long-term growth in the coming quarters.
PEP’s Competitors: KO & KDP’s Smart Moves
In the fiercely competitive beverage industry, PepsiCo faces strong challenges from two major players like The Coca-Cola Company KO and Keurig Dr Pepper KDP, each leveraging distinct strengths to capture market share and drive growth.
Coca-Cola continues to focus on brand strength and global reach to maintain its leadership in the non-alcoholic beverage sector. Despite facing similar volume pressures, Coca-Cola's pricing power and brand loyalty have allowed it to deliver strong margin performance. Its global dominance in sparkling beverages, particularly with Coca-Cola Zero Sugar, and its diversified presence across more than 200 markets reinforce its position as a formidable competitor to PepsiCo.
Keurig Dr Pepper operates with a unique edge through its hybrid portfolio of hot and cold beverages, anchored by its leadership in single-serve coffee systems and popular soft drink brands like Dr Pepper and Canada Dry. Keurig Dr Pepper benefits from a strong foothold in at-home consumption trends, particularly with its Keurig brewers. Its recent moves toward premiumization, strategic partnerships and focus on functional beverages demonstrate a nimble approach to consumer preferences.
PEP’s Price Performance, Valuation & Estimates
Shares of PepsiCo have lost around 8.3% year to date against the industry’s growth of 3.7%.
Image Source: Zacks Investment ResearchFrom a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 16.88X, slightly below the industry’s average of 17.39X.
Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 1.8%, whereas its 2026 earnings estimate indicates year-over-year growth of 5.2%. The company’s EPS estimates for 2025 and 2026 have moved northward in the past 30 days.
Image Source: Zacks Investment ResearchPEP stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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CocaCola Company (The) (KO): Free Stock Analysis Report PepsiCo, Inc. (PEP): Free Stock Analysis Report Keurig Dr Pepper, Inc (KDP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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