PepsiCo Inc. (NASDAQ:PEP)

Overall Debt Levels

The debt to equity ratio exhibits a declining trend from 3.28 in 2020 to 2.28 in 2022, followed by a slight increase to 2.46 in 2024. Incorporating operating lease liabilities, the ratio similarly decreases from 3.41 to 2.42 by 2022, then rises modestly to 2.65 by 2024. This indicates a reduction in reliance on debt relative to equity over the first three years, with a moderate uptick in the final two years.

Debt to Capital and Assets

The debt to capital ratio decreases from 0.77 in 2020 to 0.69 in 2022, before slightly increasing to 0.71 in 2024. When including operating lease liabilities, this ratio shows a milder decline and a steady subsequent increase, ending at 0.73 in 2024. Similarly, debt to assets ratios decline from 0.48 to 0.42 by 2022, then rise to 0.45 by 2024. Including operating leases, the ratios follow the same pattern with slightly higher values. These patterns confirm the initial reduction in leverage, with some re-leveraging in the latter years.

Financial Leverage

Financial leverage decreases consistently from 6.91 in 2020 to 5.38 in 2022, indicating a reduction in the degree to which assets are financed by debt. However, it then increases marginally to 5.51 by the end of 2024, reflecting a minor increase in leverage but remaining below the 2020 level.

Interest and Fixed Charge Coverage

Interest coverage ratio initially declines from 8.24 in 2020 to 5.94 in 2021, then improves significantly to 10.57 in 2022. It decreases again to 8.44 in 2024, but remains above the earlier low, suggesting improved ability to meet interest obligations as of 2022. Fixed charge coverage shows a similar trend with a decrease to 4.85 in 2021, a peak at 7.28 in 2022, and a decline to 5.99 in 2024. These fluctuations reflect volatility in earnings or interest expenses impacting the company's coverage capabilities over time.

Total Debt

The total debt experienced a decline from 44,150 million US dollars in 2020 to 39,071 million in 2022. However, it then increased to 44,105 million in 2023 and slightly rose further to 44,306 million in 2024. This suggests a trend of initial debt reduction followed by a resurgence to near the initial level by the end of the period.

Total PepsiCo Common Shareholders’ Equity

Shareholders’ equity showed a consistent upward trend over the five-year period, rising from 13,454 million US dollars in 2020 to a peak of 18,503 million in 2023. There was a small decrease in 2024 to 18,041 million, but overall equity increased significantly, indicating strengthening of the equity base.

Debt to Equity Ratio

The debt to equity ratio decreased notably from 3.28 in 2020 to 2.28 in 2022, reflecting an improvement in the company’s leverage position through either debt reduction or equity growth. From 2022 onwards, the ratio slightly increased, reaching 2.46 by the end of 2024, indicating a modest rise in leverage relative to equity, but still remaining considerably lower than the initial 2020 level.

Total debt (including operating lease liability)

The total debt exhibits a fluctuating pattern over the periods analyzed. Initially, there is a notable decrease from 45,843 million US dollars in 2020 to 41,487 million US dollars in 2022. However, this trend reverses in the subsequent years, with debt rising to 47,061 million in 2023 and slightly increasing further to 47,751 million in 2024. This suggests an overall strategy of debt reduction followed by increased leverage or financing needs in the later years.

Total PepsiCo common shareholders’ equity

Shareholders' equity has shown a consistent upward trend from 13,454 million US dollars in 2020 through to 18,503 million in 2023, indicating ongoing growth in net assets attributable to common shareholders. However, there is a modest decline in 2024 to 18,041 million, which may indicate some distribution or loss affecting equity in that year. The general increase over the five-year period reflects strengthening equity despite the slight recent dip.

Debt to equity (including operating lease liability)

The debt to equity ratio displays a decreasing trend from 3.41 in 2020 to 2.42 in 2022, indicating improved leverage conditions and a stronger equity position relative to debt. After 2022, the ratio begins to rise again, reaching 2.65 by 2024, aligning with the increase in total debt and the slight reduction in equity observed in the same period. This trend signals a shift towards greater reliance on debt financing relative to equity in the most recent years.

Total Debt

The total debt exhibited a declining trend from 44,150 million US dollars at the end of 2020 to 39,071 million US dollars by the end of 2022. However, there was an increase in total debt in the subsequent years, rising to 44,105 million US dollars in 2023 and slightly increasing further to 44,306 million US dollars in 2024. This indicates initial debt reduction efforts followed by an upward adjustment in liabilities in the later periods.

Total Capital

Total capital showed a general pattern of stability with a slight decrease from 57,604 million US dollars in 2020 to 56,220 million US dollars in 2022. Subsequently, it experienced growth to 62,608 million US dollars in 2023 before a minor decline to 62,347 million US dollars in 2024. This suggests that while capital structure remained relatively steady in the early years, there was a notable increase during the 2023 fiscal year followed by marginal contraction.

Debt to Capital Ratio

The debt to capital ratio decreased from 0.77 in 2020 to 0.69 in 2022, reflecting a reduction in leverage during this period. Subsequently, the ratio increased to 0.70 in 2023 and further to 0.71 in 2024. Despite the modest rise in the last two years, the ratio remains below the initial 2020 level. This pattern indicates improved capital structure management with a decreasing reliance on debt up to 2022, followed by a moderate increase in leverage in the later years.

Total Debt (Including Operating Lease Liability)

The total debt showed a decreasing trend from 45,843 million US$ in 2020 to 41,487 million US$ in 2022. However, from 2022 onwards, this trend reversed, with debt increasing to 47,061 million US$ in 2023 and further rising slightly to 47,751 million US$ in 2024.

Total Capital (Including Operating Lease Liability)

Total capital remained relatively stable between 59,297 million US$ in 2020 and 58,636 million US$ in 2022, showing minor fluctuations during this period. From 2023 onwards, there was a notable increase, reaching 65,564 million US$ in 2023 and slightly growing again to 65,792 million US$ in 2024.

Debt to Capital Ratio (Including Operating Lease Liability)

The debt to capital ratio demonstrated a consistent decline from 0.77 in 2020 to 0.71 in 2022, indicating an improvement in capital structure with relatively lower leverage over this period. In 2023, the ratio increased marginally to 0.72, followed by a small further increase to 0.73 in 2024, suggesting a modest rise in leverage following the earlier trend of deleveraging.

Total Debt

The total debt experienced a decrease from US$44,150 million in 2020 to US$39,071 million in 2022, indicating a reduction in liabilities over this period. However, from 2022 onwards, there was an upward trend with total debt rising again to US$44,306 million in 2024, nearly returning to the 2020 level.

Total Assets

Total assets showed a slight decline from US$92,918 million in 2020 to US$92,187 million in 2022. Subsequently, assets increased significantly to peak at US$100,495 million in 2023 before dipping marginally to US$99,467 million in 2024. This indicates an overall growth in asset base towards the later years.

Debt to Assets Ratio

The debt to assets ratio dropped steadily from 0.48 in 2020 to a low of 0.42 in 2022, demonstrating an improvement in the capital structure by reducing reliance on debt relative to assets. However, this ratio increased slightly to 0.45 by 2024, reflecting a moderate rise in leverage.

The financial data reveals several important trends in the company's capital structure and asset base over the analyzed period.

Total Debt (including operating lease liability)

The total debt exhibits a decreasing trend from 2020 through 2022, dropping from $45.843 billion to $41.487 billion. However, this decline reverses starting in 2023, with debt increasing to $47.061 billion and further to $47.751 billion in 2024. This pattern suggests an initial effort to deleverage, followed by renewed borrowing or lease obligations in recent years.

Total Assets

Total assets remain relatively stable between 2020 and 2022, hovering around $92.3 billion. Beginning in 2023, the asset base experiences a significant increase to $100.495 billion before slightly declining to $99.467 billion in 2024. The substantial asset growth in 2023 may reflect acquisitions, capital investments, or revaluation of existing assets.

Debt to Assets Ratio (including operating lease liability)

The debt to assets ratio declines consistently from 0.49 in 2020 to 0.45 in 2022, indicating improving financial leverage and reduced financial risk over those years. Subsequently, the ratio rises to 0.47 in 2023 and 0.48 in 2024, correlating with the uptick in total debt relative to assets. Despite increased debt levels, the leverage remains below the 2020 level, suggesting a moderate increase in risk but not surpassing prior ratios.

Overall, the data indicates a period of deleveraging followed by renewed borrowing, potentially to support asset growth or strategic initiatives. The asset growth observed in 2023 likely contributed to maintaining the leverage ratio at a controlled level despite rising debt. Monitoring of the debt trends and their impact on financial stability is advisable given the recent uptick in both debt and leverage ratios.

Total Assets

Over the five-year period, total assets demonstrated a generally stable trend with minor fluctuations. Initially, assets slightly declined from 92,918 million US dollars in 2020 to 92,187 million in 2022. Subsequently, there was a notable increase to 100,495 million in 2023, followed by a small decrease to 99,467 million in 2024. This pattern suggests a phase of modest contraction, a significant asset accumulation in 2023, and stabilization at a high level in the final year.

Total PepsiCo Common Shareholders’ Equity

Shareholders’ equity showed a steady upward trend over the period. Starting at 13,454 million US dollars in 2020, it rose consistently each year, reaching 18,503 million by 2023 before experiencing a slight decline to 18,041 million in 2024. The overall growth indicates improvement in the company's net asset value attributable to shareholders, reflecting positive retained earnings or equity issuance, with a minor correction in the last year.

Financial Leverage

Financial leverage, defined as the ratio of total assets to equity, exhibited a decreasing trend from 6.91 in 2020 to 5.38 in 2022, implying a reduction in reliance on debt or liabilities to finance assets. The ratio then showed a slight increase to 5.43 in 2023 and further to 5.51 in 2024, indicating a moderate rise in leverage toward the end of the period. This pattern suggests initially improving financial stability followed by a modest increase in leverage, potentially reflecting strategic adjustments in capital structure.

Earnings before interest and tax (EBIT)

The EBIT showed a generally increasing trend over the five-year period, starting at 10,321 million US dollars in 2020 and rising consistently each year to reach 13,552 million US dollars in 2024. The annual growth indicates an overall improvement in operational profitability and business performance.

Interest expense

Interest expense exhibited some volatility. It increased from 1,252 million US dollars in 2020 to a peak of 1,988 million US dollars in 2021, then declined to 1,119 million in 2022. In the subsequent years, it rose again to 1,437 million in 2023 and further to 1,606 million in 2024. This fluctuation suggests changes in borrowing costs or debt levels over the period.

Interest coverage ratio

The interest coverage ratio, which measures the ability to meet interest obligations from EBIT, declined from 8.24 in 2020 to 5.94 in 2021, reflecting increased interest expense despite EBIT growth. It improved significantly to 10.57 in 2022, due to reduced interest expense combined with stable EBIT. Afterwards, it decreased progressively to 8.95 in 2023 and 8.44 in 2024, indicating a moderate reduction in the safety margin but remaining at comfortable levels above 8 times coverage.

Overall insights

The data indicates a strong operational profitability growth supported by increasing EBIT. Interest expenses showed variability, which influenced the interest coverage ratio, although the company maintained a healthy ability to meet its interest obligations. The fluctuations might be attributable to changing financing strategies or market interest rates. Maintaining EBIT growth alongside managing interest costs will be critical for sustaining financial stability moving forward.

Earnings Before Fixed Charges and Tax

The earnings before fixed charges and tax have shown a consistent upward trend over the five-year period. Starting at 10,860 million USD in 2020, there was a steady increase each year, reaching 14,340 million USD by the end of 2024. This indicates a positive growth trajectory in operating profitability before accounting for fixed financial obligations.

Fixed Charges

Fixed charges displayed significant variability during the period. Initially increasing from 1,791 million USD in 2020 to a peak of 2,551 million USD in 2021, the amount then dropped to 1,704 million USD in 2022. After 2022, fixed charges climbed again, rising to 2,103 million USD in 2023 and further to 2,394 million USD in 2024. This fluctuation suggests changes in financial costs or obligations that may have been influenced by debt refinancing or other financial management strategies.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio experienced notable fluctuations but remained at a reasonably healthy level throughout the period. It started at 6.06 in 2020, dropped to the lowest point of 4.85 in 2021, which aligns with the peak in fixed charges that year. The ratio then improved significantly to 7.28 in 2022, reflecting lower fixed charges coupled with steady earnings before fixed charges and tax. Subsequently, the ratio declined again to 6.43 in 2023 and 5.99 in 2024, although these remain above 5.0, indicating that earnings have continued to sufficiently cover fixed charges.

Overall Analysis

The data reflects solid operational earnings growth over the five years, which supports the company's ability to manage and cover fixed charges consistently. Despite variability in fixed charges, the fixed charge coverage ratio remained at comfortable levels, suggesting financial stability and adequate capacity to meet fixed financial obligations. The peak in fixed charges in 2021 negatively affected coverage, but recovery in the following years shows effective management of fixed expenses relative to earnings.