PEP
PepsiCo, Inc.
Consumer Defensive · Beverages - Non-Alcoholic · United States · Stock
Score Breakdown
Scored for Dividend Income profile
Sub-scores are 0–20 each; Model Score is weighted by your selected investment goal. How it works →
Why Ranked Here
- Above-average scores in profitability, financial health, and momentum reflect PepsiCo's solid margins, manageable debt servicing, and a recent quarterly earnings rebound, anchoring the composite at a mid-range level.
- The growth score was weighed down by the combination of only modest revenue gains and a meaningful -14.0% contraction in net income, limiting upside to the composite.
- The absence of a macro theme assignment and a dividend score discounted by a 92.7% payout ratio both constrained the total composite, resulting in a 53.2/100 score and a Research Further label.
Why Not Higher
- The steep decline in net income (-14.0%) and diluted EPS (-13.7%) in FY2025 produced a below-average growth score that offset the company's otherwise solid profitability and financial health ratings.
- The very high dividend payout ratio of 92.7% and the absence of any macro theme assignment both weighed on the composite, preventing a higher overall score.
Data Confidence
10 / 10
Very High — full data coverage
Why This Score
Grounded in figures from this company's SEC EDGAR filings — not a restatement of the score itself.
Revenue grew modestly from FY2024 to FY2025, rising +2.3% to $93,925,000,000, but net income fell -14.0% to $8,240,000,000 and diluted EPS declined -13.7% to $6.00 over the same period.
The model penalized the combination of weak top-line growth and a meaningful contraction in bottom-line profitability, resulting in a below-average growth score that reflects the earnings deterioration outweighing the modest revenue gain.
In FY2025, PepsiCo reported a net margin of 8.8%, an operating margin of 12.2%, and a return on assets of 7.7%.
These metrics indicate that the company converts a meaningful share of revenue into operating and net income and generates a solid return on its asset base, which the model rewarded with an above-average profitability score.
In FY2025, PepsiCo carried a debt-to-equity ratio of 2.27 and an interest coverage ratio of 10.3, against a total asset base of $107,399,000,000.
The elevated leverage is offset by a robust interest coverage ratio, indicating the company comfortably services its debt obligations; the model appears to have weighted the strong coverage and large asset base favorably, producing an above-average financial health score.
Over the last four reported quarters, operating income moved from $3,569,000,000 in 2025Q3 and $3,557,000,000 in 2025Q4 to $3,213,000,000 in 2026Q1, then rebounded to $4,023,000,000 in 2026Q2; net income followed a similar pattern, dipping to $2,327,000,000 in 2026Q1 before recovering to $2,981,000,000 in 2026Q2.
The model appears to have rewarded the recovery and acceleration in both operating income and net income in the most recent quarter, interpreting the 2026Q2 rebound as positive near-term momentum despite the mid-sequence dip.
PepsiCo's dividends per share have risen each year from $4.525 in FY2022 to $4.945 in FY2023, $5.33 in FY2024, and $5.6225 in FY2025, but the dividend payout ratio reached 92.7% of net income in FY2025.
The model likely credited the consistent multi-year dividend growth streak while discounting the score due to the very high payout ratio, which leaves limited earnings headroom to sustain or grow the dividend if profitability were to decline further.
PepsiCo is not currently assigned to any of the 24 tracked macro themes in the model.
The absence of a theme assignment means the security did not qualify for any thematic score contribution under the current methodology; this is a neutral classification and does not reflect on the company's underlying business quality.
Research Summary
AI-generated analysis reflects data and conditions as of the report date shown above. Verify any specific figures through primary sources before acting on this analysis.
PepsiCo posted modest revenue growth of +2.3% to $93,925,000,000 in FY2025, but net income fell -14.0% to $8,240,000,000 and diluted EPS declined -13.7% to $6.00, creating a mixed fundamental picture. Profitability metrics remain solid, with a net margin of 8.8%, an operating margin of 12.2%, and a return on assets of 7.7%, while the balance sheet carries elevated leverage at a debt-to-equity ratio of 2.27 but is supported by a comfortable interest coverage ratio of 10.3. Near-term momentum improved in the most recent quarter, with operating income rebounding to $4,023,000,000 in 2026Q2 after a dip in 2026Q1, though the dividend payout ratio of 92.7% leaves limited earnings headroom. The composite score of 53.2/100 reflects these offsetting strengths and weaknesses, earning a Medium risk rating and a Research Further label.
Plain English
PepsiCo is a large, profitable company that grew its sales slightly last year, but its profits dropped noticeably, it carries a lot of debt, and it pays out almost all of its earnings as dividends, which makes the stock worth looking into more carefully before deciding anything.
Bull Case vs. Bear Case
Bull Case
- Solid profitability metrics — including an 8.8% net margin, 12.2% operating margin, and 7.7% return on assets in FY2025 — demonstrate that PepsiCo consistently converts revenue into meaningful income and asset returns.
- Despite elevated leverage, an interest coverage ratio of 10.3 against a total asset base of $107,399,000,000 indicates the company comfortably services its debt obligations, supporting financial stability.
- Quarterly momentum improved meaningfully in 2026Q2, with operating income rebounding to $4,023,000,000 and net income recovering to $2,981,000,000 after a mid-sequence dip, suggesting near-term operational resilience.
Bear Case
- Net income fell -14.0% to $8,240,000,000 and diluted EPS declined -13.7% to $6.00 in FY2025, signaling that bottom-line profitability deteriorated significantly even as revenue grew modestly.
- The dividend payout ratio reached 92.7% of net income in FY2025, leaving very little earnings headroom to sustain or grow the dividend if profitability were to decline further.
- PepsiCo is not assigned to any of the 24 tracked macro themes, meaning it receives no thematic tailwind contribution to its composite score under the current model methodology.
What Could Change the Picture
Bullish Triggers
- A sustained recovery in net income and EPS over multiple quarters — reversing the -14.0% net income decline seen in FY2025 — would meaningfully strengthen the growth score and overall composite.
- A reduction in the dividend payout ratio, achieved through earnings growth rather than dividend cuts, would signal improved financial flexibility and reduce a key risk flagged by the model.
Bearish Triggers
- If the 2026Q2 operating income rebound to $4,023,000,000 proves temporary and earnings resume their downward trend, the momentum score could deteriorate and further pressure the composite.
- Any further compression in net margin below the current 8.8% level, combined with the already-elevated debt-to-equity ratio of 2.27, could raise concerns about the company's ability to service debt and maintain its dividend.
Risk Profile
Medium RiskPepsiCo carries an elevated debt-to-equity ratio of 2.27, though this is substantially mitigated by an interest coverage ratio of 10.3, indicating the company generates sufficient operating income to comfortably meet its interest obligations. Near-term momentum showed a mid-sequence dip in 2026Q1 before recovering in 2026Q2, suggesting some quarterly variability in earnings that investors should monitor.
This report is for educational and research purposes only. It does not constitute financial, investment, legal, or tax advice — always conduct your own due diligence before making investment decisions.