Morgan Stanley gives PepsiCo, Inc. a "hold" rating, and is optimistic about its productivity and international business.

Morgan Stanley gives PepsiCo, Inc. a "hold" rating with a target price of $165. The current market cap of the company is approximately $203.583 billion, with a 52-week stock price range of $177.50 to $127.60. From a financial perspective, Morgan Stanley predicts earnings per share for the fiscal years 2025 to 2028 to be $8.16, $8.12, $8.55, and $9.07 respectively, with the corresponding P/E ratios gradually decreasing from 18.6 times to 16.6 times. The dividend yield is expected to increase steadily from 3.4% in 2025 to 4.2% in 2028, indicating long-term return potential. In terms of market strategy, PepsiCo, Inc. is expected to achieve double-digit growth in earnings per share in the fourth quarter mainly due to productivity improvements, accelerated growth in international beverage business, currency advantages, and cost control. Specific measures include closing two factories and reducing 7,000 employees in the North American snack business to enhance automation; resolving excess capacity issues in the North American beverage business through years of manufacturing and distribution adjustments; and the Global Capability Center has significantly optimized labor and automation efficiency despite starting later. Although marketing expenses as a percentage of sales have slightly decreased, advertising effectiveness has been maintained through productivity improvements and digital expenditure optimization. International beverage business sales volume declined by 5% in the third quarter, but a recovery is expected in the fourth quarter, with the long-term international business, which accounts for 40% of total revenue, still regarded positively. As for North American beverage franchising, nearly a quarter of bottling operations are currently franchised, with more regional franchise models expected in the future. Valuation analysis shows that the target price is based on a projected P/E ratio of 18 times in 2027, with a roughly 10% discount compared to large peer companies like Coca-Cola Company and Procter & Gamble Company, primarily due to weaker market share trends in the United States and potential reinvestment needs. However, this discount is partially offset by productivity improvements and international growth potential. Growth drivers include high-profit contributions from international business, profit margin expansion in North American beverages (driven by product portfolio reshaping), and optimization of cost curve in snack business by lowering fixed cost structures. In terms of risks, upside risks include snack revenue recovery, strong performance in international business, margin improvement, and recovery of market share in North American beverages; downside risks include inadequate return on reinvestment, macroeconomic fluctuations, slow recovery in North American volumes, commodity and currency fluctuations, sustained low market share in beverages, and the impact of GLP-1 drugs on consumer behavior. Morgan Stanley states that PepsiCo, Inc.'s international beverage business is expected to resume growth trajectory in the fourth quarter, with overall revenue expected to improve; productivity improvements will address the issue of lower-than-expected revenue by adjusting snack business costs and assets (such as factory closures); despite the decrease in marketing expenses, the company is reinvesting through upgrades like Zhejiang Nhu; in the North American beverage business, PepsiCo, Inc. brand is stabilizing due to strong performance of zero-sugar product portfolio, but Morgan Stanley remains cautious about overall growth.