PepsiCo (PEP) Implied Volatility Skew Suggest Slightly Bearish Ahead of Earnings
$PepsiCo (PEP.US)$ is scheduled to report its third quarter 2024 earnings on 08 Oct 2024 before the market open. Their international business continues to strengthen its overall performance. Still, PEP stock has been lagging the general market along with most staples. Investors should proceed with caution heading into the announcement.
In July, PEP said it expected full-year adjusted EPS of at least $8.15 and organic revenue growth of "approximately" 4%. RBC has also mentioned that it sees "modest pressure" to the organic sales outlook given volume pressure domestically, but would expect the earnings guidance to be largely maintained.
The market is expecting EPS for the full year to come in at $8.15 and 3.7% growth, for this upcoming earnings, we are expecting a $2.30 earning per share.
Consumer Staples Sector Lacklustre Performance Might Affect PEP Earnings
If we looked at the past 5 days performance of the S&P 500 Consumer Staples sector, where PEP has a 5.66%, it is having a negative change of -2.41%.
Looking at similar beverage company in this sector, most of them are having negative performance except for large retailer like $Walmart (WMT.US)$ and $Target (TGT.US)$
So we need to be aware that PEP earnings might be affected by performance in this sector, unless PEP earnings could provide a big surprise in terms of revenue and earnings per share.
PepsiCo (PEP) Year-To-Date Returns On Its Stock Price Not Really Impressive
Looking at how PEP have performed year-to-date on its stock price, they are only giving slightly more than 1%, so this might not impress the investors to be confident about this stock.
We might need to look at how PEP earnings played out as there might be a shift on how consumer buy their products.
PepsiCo (PEP) Price Target Forecast
Based on 16 Wall Street analysts offering 12 month price targets for PepsiCo in the last 3 months. The average price target is $184.88 with a high forecast of $202.00 and a low forecast of $170.00. The average price target represents a 10.07% change from the last price of $167.97.
If we were to look at the performance of PEP over the past week, they are losing quite significantly as the market begin the rally build, we might see an adjustment to its stock price prior to its earnings.
PepsiCo (PEP) Implied Volatility Skew Show Slightly Bearish
The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls. The implied volatility for downside puts is increasing relative to upside calls, this suggests the market is pricing in a larger fear to a downside move.
The skew indicator is showing signal of a slightly bearish.
PepsiCo (PEP) Technical Analysis - MACD and Multi-timeframe
Currently PEP is trading both short-term and long-term MA and the MTF is giving a neutral signal ahead of its earnings, this could mean that PEP might continue to trade lower.
If we looked at the MACD, there is a high possibility of a MACD crossover, but I would expect PEP to trade lower ahead of its earnings.
Summary
I think with the consumer getting more health conscious, PEP products might not be so appealing except some of their healthier one, and the consumer staples sector is not performing after the rate cut announced, and with the consumer sentiment reduced, there might be some more downside expected.
PEP would be feeling the impact from this sector, so even with a positive earnings, we might see PEP trading lower post earnings.
Appreciate if you could share your thoughts in the comment section whether you think PEP could surprise us in its earnings and we could see a better performance on the consumer staples sector as well.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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