PepsiCo, Inc.PEP is expected to register top-line growth when it reports third-quarter 2026 numbers on Oct. 8, before the opening bell.
The Zacks Consensus Estimate for third-quarter revenues is pegged at $24.9 billion, implying 3.9% growth from the year-ago quarter's reported figure. For quarterly earnings, the consensus mark is pegged at $2.29, flat with the prior-year quarter. The consensus mark for earnings has moved down by a penny in the past seven days.
In the last reported quarter, the company registered an earnings surprise of 0.5%. It has delivered an earnings surprise of 1.7%, on average, in the trailing four quarters.
PEP's Earnings Whispers
Our 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 -0.10%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
What to Look for in PEP’s Q3 Earnings Release
PepsiCo's third-quarter earnings release will be closely watched for signs of improvement in North America, sustained international momentum and the company’s ability to protect margins amid higher costs.
North America remains the key area to monitor. North America continues to lag international performance, as consumers remain cautious amid tighter household budgets and higher inflation. PepsiCo’s North American business continues to face weak category demand and uneven volume trends. In the second quarter of 2026, North America organic revenues edged down 0.5%, while PepsiCo Foods North America revenues fell 2% due mainly to lower effective net pricing. PepsiCo Beverages North America posted 1% organic revenue growth, but organic volume declined 4%.
Management expects a more gradual recovery in North American trends through the rest of 2026. Tight consumer budgets, inflationary pressure and increased affordability investments may continue to limit pricing and margins. Although convenient foods gained volume share, overall financial performance remains subdued. Since North America is one of PepsiCo’s largest and most profitable regions, persistent weakness could offset strong international growth and constrain company-wide organic revenue and earnings momentum. Our model predicts revenues for the PFNA segment to decline 1% year over year in the third quarter.
Margins will also be critical. While productivity initiatives continue generating savings, profitability remains under pressure from affordability investments, higher operating costs and inflation. The second-quarter 2026 core operating margin declined 40 basis points as affordability investments, cost inflation and unfavorable mix weighed on profitability. PepsiCo expects higher input-cost inflation in the second half, though productivity savings and tariff refunds should mitigate part of the pressure. The company expects earnings growth to be weighted toward the fourth quarter, raising execution risks. If productivity efforts fail to fully offset inflation, promotional activity and reinvestment, core operating leverage could remain weak and pressure earnings growth in the to-be-reported quarter.
However, the company is expected to have benefited from robust international growth, expanding global volume trends, sustained product innovation and productivity initiatives. International organic revenues advanced 7% in the second quarter, marking the 21st consecutive quarter of at least mid-single-digit growth. Investors should watch whether volume growth remains broad-based across beverages and convenient foods.
Our model predicts revenues for the International Beverages Franchise (IB Franchise) segment to improve 9% year over year in the third quarter of 2026. In international convenient foods, revenues for EMEA, LatAm Foods and the Asia-Pacific are expected to increase 7%, 5% and 10%, respectively, in the third quarter.
Price Performance & Valuation
PEP shares have exhibited weakness in the past three months. The stock has lost 12.1% compared with the broader industry and the Consumer Staples sector’s declines of 3.8% and 6%, respectively. PepsiCo’s stock has also underperformed the S&P 500 index’s growth of 1.6% in the same period.
PEP Stock’s 3-Month Performance
At the current stock price of $125.89, PepsiCo trades 0.6% above its 52-week low mark of $125.16 and 26.6% below its 52-week high of $171.48.
The PEP stock has underperformed its peers, including The Coca-Cola CompanyKO, which rose 3.3% in the past three months. The stock also lagged Monster Beverage CorporationMNST and Keurig Dr Pepper Inc. KDP, which fell 11.8% and 4.3%, respectively, in the past three months.
PepsiCo is trading at a forward P/E ratio of 14.24X, below the S&P 500’s average of 19.76X and the broader industry’s average of 18.49X. PEP’s forward 12-month P/E valuation shows a notable discount to the broader market.
PepsiCo’s Investment Thesis
PEP 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.
Conclusion
PepsiCo enters its third-quarter earnings release with a balanced mix of opportunities and challenges. The company continues to benefit from its diversified portfolio, global scale and sustained investments in innovation, affordability and productivity, which support its long-term growth prospects. However, near-term pressures remain, including higher commercial spending, persistent softness in North American volumes, uncertainty surrounding tariff-related costs and a cautious consumer backdrop.
Investors will be looking for clearer evidence that improving volume trends, productivity savings and pricing initiatives are translating into stronger profitability. Particular attention will likely center on the pace of recovery in North America, where demand has remained softer than anticipated, as well as whether international momentum can continue to offset domestic weakness.
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.
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