BofA Securities analyst Bryan D. Spillane expresses views on PepsiCo, Inc.'s (NASDAQ:PEP) mixed third-quarter results reported on Tuesday.

Today, the company reported adjusted EPS of $2.31, which beat the consensus estimate of $2.29, while revenue of $23.319 billion missed the consensus estimate of $23.825 billion.

For 2024, PepsiCo expects a low-single-digit increase in organic revenue (previously ~4%) and continues to expect at least an 8% increase in core constant currency EPS.

PepsiCo's assumption and guidance imply that 2024 adjusted EPS of at least $8.15 (consensus $8.15) will be a 7% increase year over year.

Spillane notes that the second half of the year typically accounts for over half of total revenue, and the guidance suggests organic growth of -1% to +3% in the fourth quarter.

The analyst writes that PEP is likely relying on higher productivity than initially planned to maintain its reiterated EPS, despite lowering its organic sales guidance.

However, the volume performance in the third quarter indicates a possible need for additional support next year, adds the analyst.

The analyst writes that with remedial actions addressing volume weakness now in place, he expects the stock to perform well if market share improves.

The analyst says that PEP's premium valuation of 20x over non-alcoholic beverage peers is justified by its strengthened position and pricing power amid ongoing inflationary pressures.

The analyst maintains the Buy rating and $185 price target.

Investors can gain exposure to the stock via iShares U.S. Consumer Staples ETF (NYSE:IYK) and First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG).

Price Action: PEP shares are up 0.89% at $168.69 at the last check Tuesday.

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