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This Month’s Bonus Article
Pepsi Pops as Investors Take Notice of Key Strategic Initiatives
Written by Leo Miller. Posted: 2/5/2026.
At a Glance
- PepsiCo is making key moves to improve its business, and the company’s share price is rebounding after reporting Q4 2025 earnings of $2.26 per share.
- The company is taking some of the advice provided by Elliott Management, which invested billions in PEP during 2025.
- Cost-cutting, a renewed focus on key brands, and a health-conscious product push supply room for optimism going forward.
After activist investor Elliott Management announced a $4 billion investmentin consumer staples giant PepsiCo (NASDAQ: PEP), the stock has gone on a solid run.
Elliott revealed its stake on Sept. 2, 2025, and said it saw roughly 50% upside in Pepsi shares. As of the close on Feb. 4, 2026, Pepsi shares have delivered a strong 13% total return.
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Pepsi’s latest earnings were a notable contributor to the rally. Shares popped about 5% on Feb. 3 and continued to gain the following day.
Here’s what investors should take away from the soft-drink and snack maker’s latest results and the initiatives management plans to pursue.
PEP Beats on Key Measures, Reiterates 2026 Guidance
In Q4 2025, Pepsi posted revenue of $29.3 billion, up 5.6% year-over-year, modestly beating analyst estimates of roughly $29 billion (about 4% growth).
Adjusted earnings per share (EPS) came in at $2.26, a 15% increase year-over-year and slightly ahead of the $2.24 consensus (14% growth).
Pepsi reiterated its full-year 2026 guidance, forecasting organic revenue growth of 2%–4% and core EPS growth of 5%–7%.
Pepsi Puts the Kibosh on Large-Scale Refranchising
One of Elliott’s key recommendations was that Pepsi refranchise its bottling operations — transferring bottling to independent partners while retaining brand and strategic oversight. Elliott argued this could improve margins, pointing to the benefits Coca-Cola (NYSE: KO) has seen from its refranchising efforts, and free Pepsi to focus more on product innovation.
But during an investor Q&A session in December 2025, Pepsi said “a full refranchising of our North American beverage operation is not under consideration.”
Instead, the company is testing integrated beverage-and-snack distribution in Texas and Florida. That effort includes combining delivery and warehouse operations to increase efficiency versus separate distribution systems for each business.
Pepsi described the initial results as “very positive,” saying the approach will make the company “more cost efficient.” Notably, the company reported a 140-basis-point increase in core operating margin to 13.9%.
Pepsi Refocuses on Top Brands With Health-Conscious Consumers in Mind
Following other suggestions from Elliott, Pepsi is streamlining its North American foods business. In the first half of 2026, the company plans to reduce the number of unique food products it sells by nearly 20%.
Management will concentrate on refreshing iconic brands like Lay’s, Tostitos and Quaker, relaunching them in the U.S. with updated visuals, marketing and ingredient profiles aimed at health-conscious consumers. Beverages such as Gatorade and Pepsi will also see health-focused product launches.
Additionally, Pepsi plans to lower prices by up to 15% on certain snacks. The company calls this a “price investment” — the idea is that lower prices will boost frequency and volume, offsetting the negative effects higher prices had on consumer purchase behavior.
These moves make strategic sense: Pepsi is trimming underperforming items and doubling down on its largest brands. That approach builds on recent successes with health-oriented offerings such as Poppi, a prebiotic soda brand whose retail sales rose more than 45% in 2025 versus overall company growth of about 2%.
Vantage Market Research projects the healthy snack market will nearly double by 2035, and a recent survey found that 61% of consumers are willing to pay more for healthier snacks. While inflation has strained household budgets, Pepsi’s “price investment” could appeal to cost-conscious shoppers and help drive incremental volume.
Improving Outlook Combined With a Strong Dividend Yield
The consensus 12-month average price target for PEP is near $165, roughly in line with the Feb. 4 closing price of about $166. Several Wall Street analysts raised their Pepsi price targets after the Q4 report, with the average target moving to $170 — implying roughly 2% upside from current levels.
Beyond potential capital appreciation, Pepsi’s 3.4% dividend yield provides a meaningful source of return. After 54 consecutive years of increasing its payout, Pepsi is a member of the Dividend Kings club.
With a long streak of earnings beats (18 of the last 19 quarters), maintained 2026 guidance, and a combination of cost-saving initiatives and product repositioning, Pepsi appears to be moving in the right direction for shareholders.
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