PepsiCo Outlines Shareholder Value Key Actions & Preliminary 2026 View

PepsiCo, Inc. PEP looks well-poised for growth on strength in its core categories, diversified portfolio, improved digital capabilities and flexible go-to-market distribution systems. In the latest update, PepsiCo outlined a few commercial and financial priorities to boost shareholder value, consisting of a preliminary 2026 financial view. The announcement came after a thorough review of the company’s strategic initiatives and long-term plans. Such efforts target accelerating organic revenue growth and improving core operating margin with record productivity savings in 2026. These targets are very important to enhancing long-term shareholder value. 

The company is focused on improving the marketplace competitiveness and financial performance of PepsiCo Foods North America by enhancing everyday value by strategically focusing on affordable price tiers by brands and channel, with the goal of driving growth and boosting purchase frequency for its mainstream brands.

PEP is advancing a broad innovation agenda centered on permissible and functional products that eliminate artificial colors and flavors, feature simple ingredients and offer high levels of protein, fiber and whole grains. This comprises the launch of Simply NKD Cheetos and Doritos, refreshed positioning for Lay’s and Tostitos, and the planned 2026 debut of Doritos Protein. 

The company is aggressively cutting operating costs and strengthening operational excellence, with the resulting savings reinvested in advertising, marketing and enhanced consumer value. It has shut three manufacturing plants and several manufacturing lines this year and is on track to lower nearly 20% of SKUs in the US by early next year.

Management anticipates 2026 organic revenue growth in the range of 2-4%, delivering at the high end in the second half. Acquisitions, net of divestitures, that occurred this year are likely to contribute one percentage point to reported net revenue growth in 2026. Based on the existing foreign exchange spot rates, foreign currency translation is likely to benefit reported net revenue growth by roughly one percentage point in fiscal 2026. The ranges imply net revenue growth in a range of 4-6% in 2026.

What’s More For PEP?

The company intends to advance and accelerate its global productivity efforts through more automation, digitalization and simplification. Management anticipates at least 100 basis points of core operating margin expansion in aggregate in the next three fiscal years.

It forecasts the core effective annual tax rate to be about 22% in 2026 owing to the pending impact of global minimum tax regulations. Based on the existing foreign exchange spot rates, foreign currency translation is likely to benefit core EPS by approximately one percentage point in fiscal 2026. It expects core EPS to rise approximately 5-7% in fiscal 2026, or approximately 7-9% excluding the impact of global minimum tax regulations. 

To boost the marketplace competitiveness and financial performance of PepsiCo Foods North America, the company is investing in the business, with capital spending expected to be below 5% of net revenues in 2026; paying and raising annual dividends (following 53 consecutive years of increases), subject to the board’s approval; and balancing portfolio-optimization activities versus share buybacks with access to Tier 1 commercial paper.

PEP anticipates a free cash flow conversion ratio of at least 80% in 2026, including a final tax payment of about $1 billion associated with the Tax Cuts and Jobs Act of 2017), and at least 90% in 2027. Subject to the company’s board approval, it expects to raise annual cash returns to shareholders via dividends and share repurchases in both years.

Hence, management has affirmed its 2025 financial guidance. For 2025, PepsiCo had anticipated low-single-digit organic revenue growth with core constant currency EPS to be almost in line with the previous year. PepsiCo envisioned core EPS to decline 0.5% year over year in 2025 compared with the previous expectation of a 1.5% decline. The company reported a core EPS of $8.16 in 2024. Shares of this Zacks Rank #3 (Hold) company have gained 10.5% in the past six months, outperforming the industry’s 0.6% drop.

Stocks to Consider in the Consumer Staples Space

United Natural Foods UNFI is a key distributor of natural, organic and specialty food and non-food products. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

The Zacks Consensus Estimate for United Natural Foods' current financial-year sales and earnings indicates growth of 1% and 187.3%, respectively, from the prior-year levels. UNFI delivered a trailing four-quarter earnings surprise of 52.1%, on average.

Utz Brands UTZ manufactures salty snacks under popular brands and has a Zacks Rank #2 (Buy) at present. UTZ delivered a trailing four-quarter average earnings surprise of 1.3%.

The Zacks Consensus Estimate for UTZ’s current financial-year sales and EPS implies growth of 2.7% and 5.2%, respectively, from the year-ago numbers.

Celsius Holdings, Inc. CELH, which specializes in nutritional functional foods, beverages and dietary supplements, starches and nutrition ingredients, currently sports a Zacks Rank of 1.

The Zacks Consensus Estimate for Celsius’ current financial-year earnings is expected to rise 80% from the corresponding year-ago reported figure. CELH delivered a trailing four-quarter earnings surprise of 42.9%, on average.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research