What Happened?
Shares of food and beverage company PepsiCo (NASDAQ: PEP) jumped 2.2% in the afternoon session after activist investor Elliott Investment Management disclosed a substantial $4 billion stake in the company.
The investment firm sent a letter and presentation to PepsiCo's board, outlining what it calls a “historic opportunity” to revitalize the company. Elliott is pushing for significant changes, citing PepsiCo's recent "strategic and operational challenges" that have led to "poor financial results" and stock underperformance. The activist investor's proposals focus on improving operations, strategic reinvestment, and enhanced accountability to unlock shareholder value. Elliott believes its plan could boost the share price by "more than 50%" and help return PepsiCo to a market-leading position.
After the initial pop the shares cooled down to $151.98, up 2.2% from previous close.
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What Is The Market Telling Us
PepsiCo’s shares are not very volatile and have only had 1 move greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was about 2 months ago when the stock gained 7% on the news that the company reported second-quarter earnings that surpassed analyst expectations and raised its profit forecast for the full year. The beverage and snack giant posted adjusted earnings of $2.12 per share on $22.73 billion in revenue. This performance exceeded Wall Street estimates, which had projected earnings of $2.03 per share on revenue of $22.28 billion. The better-than-expected results were driven by continued momentum in its international business and improving performance in North America.
Looking ahead, PepsiCo improved its full-year 2025 guidance. The company now anticipates a smaller negative impact from foreign exchange rates, expecting a 1.5% headwind compared to the 3% previously forecast. This adjustment led to an improved outlook for its core earnings per share, which are now expected to see a smaller decline of 1.5% for the year. The company reaffirmed its expectation for low-single-digit organic revenue growth.
PepsiCo is up 1.2% since the beginning of the year, but at $151.98 per share, it is still trading 15.2% below its 52-week high of $179.30 from September 2024. Investors who bought $1,000 worth of PepsiCo’s shares 5 years ago would now be looking at an investment worth $1,061.
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