PepsiCo Faces Sluggish Near-Term Outlook with Frito-Lay Slowdown, Says BofA
Bank of America has lowered its rating on PepsiCo, citing softening momentum in the company’s Frito-Lay North America (FLNA) business and limited room for share price growth. The financial institution downgraded the stock from “buy” to “neutral,” although it modestly raised the price target from $190 to $195, suggesting only a 6% upside from its recent close.
While PepsiCo shares have risen approximately 4% year-to-date, trailing the S&P 500’s 15% gain, BofA points to moderating demand trends across the snacks and beverages categories. Of particular concern is the performance of Frito-Lay, which has long been a primary growth driver within PepsiCo’s North American portfolio. BofA analysts noted a significant deceleration in FLNA’s volume growth over recent quarters — from +7% in Q2 2023 to flat by Q1 2024.
BofA attributes the slowdown to an unfavorable mix shift, with reduced demand in key sales channels such as club and convenience stores. These segments, which previously saw strong volume contributions, are now experiencing lower traffic and purchasing rates. The firm also highlighted increasing elasticity pressures across consumer staples, particularly within low- to mid-income households, suggesting price sensitivity is affecting snack volume performance.
Despite the downgrade, BofA maintains a positive long-term view of PepsiCo’s brand portfolio and market leadership. The firm expects mid-single-digit earnings per share (EPS) growth over the next two years, supported by PepsiCo’s strong pricing power and cost management initiatives. However, near-term challenges point to a slower pace of growth compared to other large-cap staples in the sector.
PepsiCo is slated to report Q2 2024 earnings on July 11. Market analysts will be closely watching for any recovery in snack volumes, updated guidance on pricing strategy, and insights into how shifts in consumer behavior are influencing category performance.
As pricing pressures and mixed channel performances continue to affect volume trends across the FMCG landscape, PepsiCo’s performance will serve as a key bellwether for broader demand dynamics in the packaged food sector.