PepsiCo's Productivity Strategy: A Catalyst for EPS Expansion?

PepsiCo, Inc.’s PEP productivity strategy is a key lever for earnings per share (EPS) expansion, particularly in a challenging operating environment. The company is driving productivity through a mix of cost and structural efficiency initiatives, such as supply-chain optimization, greater automation, SKU rationalization and organizational simplification. These actions are aimed at offsetting input-cost inflation, expanding margins and strengthening operating leverage.

Management expects to make a balanced approach to deploy productivity savings, reinvesting in the business to support and accelerate sales growth and profitability. The company is making targeted investments funded by productivity gains, including rightsizing actions and other global productivity initiatives. These savings are being reinvested to drive category acceleration and support disciplined, long-term category management.

PEP’s productivity actions have been driving its results. PepsiCo has reported robust fourth-quarter 2025 results, wherein revenues and EPS beat the Zacks Consensus Estimate and improved year over year.  PEP’s fourth-quarter core EPS of $2.26 improved 15.3% year over year and 11% in constant currency. Continued productivity efforts, innovation, cost optimization and portfolio reshaping helped drive solid results despite ongoing supply-chain and inflationary pressures. 

Productivity savings are expected to play a critical role in funding the company’s commercial initiatives throughout 2026. PEP plans to accelerate its global productivity initiatives by expanding automation, digitalization and simplification efforts across the organization. These actions are designed to unlock efficiency gains and support a record year of productivity savings in 2026. Management had targeted at least 100 basis points of cumulative core operating margin expansion in the next few years, reinforcing its focus on disciplined execution and sustained profitability.

PEP’s Peers: How are They Doing?

The Coca-Cola Company KO is driving productivity gains by leveraging technology for data analytics, streamlining supply-chain operations and improving employee engagement. This has led to increased efficiency, reduced costs and enhanced customer satisfaction, alongside aiding KO’s margins for a while. Coca-Cola is achieving greater productivity in the marketing area through advanced analytics, improved media efficiency and disciplined spending. KO’s continued emphasis on innovation, digital transformation and marketing excellence has further strengthened its competitive position.

Monster Beverage Corporation MNST places a strong emphasis on boosting productivity. It focuses on productivity through strategic investments in research and development, operational excellence and cost management. MNST continues to innovate with new flavors and health-oriented products while optimizing its supply chain and implementing strategic pricing actions to enhance gross profit margins. In third-quarter 2025, the gross margin expanded 250 basis points, buoyed by pricing, supply-chain optimization and product sales mix. MNST’s productivity efforts, bolstered by product innovations and launches, offer a competitive edge and boost growth in the energy drinks market.

PEP’s Price Performance, Valuation and Estimates

Shares of PepsiCo have gained 18% in the past six months compared with the industry’s growth of 14.5%.

From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 19.31X compared with the industry’s average of 19.63X.

The Zacks Consensus Estimate for PEP’s 2026 and 2027 earnings per share (EPS) implies a year-over-year rise of 5.2% and 6.8%, respectively. The estimates for 2026 and 2027 have been stable in the past 30 days.

PepsiCo stock currently carries a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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