PepsiCo Stock Tests Key Support After Earnings

PepsiCo, Inc. (PEP) shares moved more than 1% lower on Tuesday morning after the beverage and snack giant reported its third quarter financial results. Revenue rose 1.5% to $16.49 billion, beating consensus estimates by $130 million, and net income reached $1.59 per share, beating consensus estimates by two cents per share. While revenue and earnings surpassed expectations, the boost came from a lower effective tax rate rather than improving profit margins.

Management indicated that beverage price increases didn't come into effect until September, so profit margins likely won't see a significant boost until the fourth quarter. The company also stated that it will remain on the sidelines of the cannabis industry until federal regulations become clearer. (See also: PepsiCo Reports Under a Negative Weekly Chart.)

Technical chart showing the performance of PepsiCo, Inc. (PEP) stock

From a technical standpoint, the stock broke down from reaction lows to S1 support and the 200-day moving average at around $109.00. The relative strength index (RSI) is approaching oversold levels with a reading of 36.17, but the moving average convergence divergence (MACD) remains in a bearish downtrend. These indicators suggest that the stock could rebound from support, but the overall sentiment remains bearish.

Traders should watch for some consolidation near S1 support and the 200-day moving average with lows reaching lower trendline support near S2 support at $106.31. If the stock breaks down from these levels, traders could see a move sharply lower to prior lows at around $94.00 over the long term. A rebound from these levels could lead to a move toward the middle of its price channel and pivot point levels near $113.00. (For more, see: PepsiCo Bets on Healthy, Eco-friendly With SodaStream Buy.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

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