QS Research · Michael Burry's Scion Capital analyst template · 2006
PEPSICO INC (PEP)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case 0% · downside -18% · upside +21%
At $141.34 (N1), PEP is priced at 12.7x TTM EV/EBITDA and 17.7x TTM P/E with a 5.4% FCF yield (N27, N29, N30) — cheap for a $98.24B-revenue global snacks/beverage franchise (N11), but not cheap enough to ignore the earnings-quality problem. The discount is explained by real issues: FY2026 core EPS growth guidance was cut to 2.5-3.5% on North American margin pressure, Q3 2026 core operating profit rose only 3% and core EPS 2%, and PFNA core operating profit fell 12% (S54, S28, S95). Section 13's base is TTM, not a cycle average: base value is today's N25/N27/N9 quote of $141.34 (0%); downside is 11.0x × $18.72B TTM EBITDA (N14) = $205.9B EV, less $44.41B debt less cash and $3.85B leases (N21-N23) = $157.7B equity ÷ 1,362.74M shares (N5) = $115.7 (-18%); upside is 15.0x × $18.72B = $280.8B EV, same bridge = $232.5B ÷ 1,362.74M = $170.6 (+21%). With base 0% below the +30% long hurdle and downside -18% not bad enough for a short, this is a watch until North America margins recover or the price falls enough to create a real margin of safety.
Key numbers
- Share price: $141.34
- Market cap: $192.61B
- Latest financial period: TTM to Sep 5, 2026
- Revenue (TTM): $98.24B
- EV / EBITDA (TTM): 12.7x
- P/E (TTM): 17.7x
- Price / book: 8.64x
The 15 boxes
- ✓ 1. Long-form business notes
PepsiCo is a six-segment global beverage and convenient food company; FY2025 revenue was $93.92B, up from $70.37B in FY2020, but operating income fell to $11.50B from $12.89B in FY2024 and net income fell to $8.24B from $9.58B. It moves product through DSD, warehouse, distributors and e-commerce; Walmart was about 14% of FY2025 consolidated net revenue and Coca-Cola is the primary beverage competitor. The oldest 10-K here (FY2020) centered on COVID-19 risk, while the latest (FY2025) flags commodity/packaging volatility and records Sabra becoming wholly owned after the December 2024 acquisition.
- ✓ 2. Competitive advantage
PepsiCo's advantage is real but uneven: it is the clear leader in U.S. convenient foods ('significant leadership positions'), while in U.S. liquid refreshment beverages it held about 16% of estimated retail sales in 2025 versus 20% for Coca-Cola, and Coke has 'significant carbonated soft drink (CSD) share advantage' outside the U.S. The edge comes from brands and a DSD distribution system, not from price: gross margin has held near 54% every year FY2020-FY2025, but operating margin fell to 12.2% in FY2025 (operating income $11.50B) from 14.0% in FY2024 ($12.89B) on revenue that still rose to $93.92B from $91.85B. Cash economics stay strong and consistent - operating cash flow $12.09B against capex $4.42B in FY2025 - but returns on equity (about 40% in FY2025 on equity of $20.41B) are flattered by a small equity base, not by a wide return on assets.
- ✓ 3. 10-Q takeaways
Q3 2026 (12 weeks ended 2026-09-05) was a solid top-line quarter on paper: net revenue $25,274M, +6% (organic +3%), operating profit $4,260M, +19%, operating margin 16.9% vs 14.9%. But the growth was largely non-operating in character: reported revenue got 2 points from acquisitions/divestitures and 1 point from FX, and GAAP operating profit got a 4-point lift from tariff refunds plus poppi-related acquisition credits, so core operating profit rose only 3% to $4,277M. North America snacks was the weak spot (PFNA operating profit -13%, core -12%) while PBNA grew revenue 5% on pricing/deals with unit volume down 2%. The 36-week +45% operating profit comparison is mostly a prior-year impairment base effect (core +5%).
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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