Wall Street Lunch: PepsiCo Gains On News Of Elliott Investment’s $4B Stake (undefined:PEP)

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Elliott Investment takes $4B stake in PepsiCo (0:15) Kraft Heinz to split into two companies. (1:30) Global bond market selloff. (2:59)

This is an abridged transcript of the podcast:

Our top story so far, shares of PepsiCo (NASDAQ:PEP) are gaining ground on the heels of reports that Elliott Investment Management has accumulated a substantial stake in the company.

The Wall Street Journal says Elliott now holds a $4 billion stake amid efforts to make “changes to boost its sagging share price.”

Elliott’s position in Pepsi, which is reportedly the hedge fund’s largest equity position ever, makes it one of the snack and beverage maker’s top five active investors, excluding index funds.

Recent shifts in consumer tastes, especially in regard to carbonated beverages, as well as lost market share in its snack business has resulted in a 14% decline in shares year-over-year versus only a 4% drop for rival Coca-Cola (KO). Additionally, Pepsi has dropped to fourth place in U.S. sales volumes behind Coke, Dr. Pepper (KDP) and Sprite (KDP).

The Journal suggests Pepsi could initiate strategies similar to those taken by Coca-Cola such as returning company-owned bottling operations to local, independent bottlers, or possibly splitting the company into two entities – food and beverage – to unlock value in the beverage business.

Seeking Alpha analyst Julia Ostian says: “The issues we’ve seen in the past, like weak demand for beverages in North America, are becoming more and more apparent, which should worry long-term investors.”

“After this year’s slip, it was a solid quarter for PepsiCo, but it doesn’t change the core concerns around growth sustainability and payout quality,” she added.

Also in the snack space, Kraft Heinz (KHC) said that its Board of Directors has unanimously approved a plan to separate the company into two independent, publicly traded companies through a tax-free spin-off.

The split aims to simplify operations and let each new company focus on its own goals, improving performance while keeping the scale needed to stay competitive.

The names of the two companies are yet to be determined. But one company will focus on sauces, spreads, seasoning and shelf-stable meals with brands including Heinz, Philadelphia and Kraft Mac & Cheese. The other will focus on grocery staples including brands like Oscar Mayer, Kraft Singles and Lunchables.

And Nestle (OTCPK:NSRGY) CEO Laurent Freixe has been ousted for failing to disclose a romantic relationship with a subordinate. He has been replaced by Philipp Navratil.

Chairman Paul Bulcke said: “This was a necessary decision. Nestlé’s values and governance are strong foundations of our company.”

Among other active stocks, Constellation Brands (STZ) is under pressure after the beer, wine and spirits company cut its fiscal 2026 financial outlook, citing weak consumer demand.

The company now sees a consensus EPS outlook of $11.30 – $11.60, down from $12.60 – $12.90. The consensus EPS estimate for the year is $12.65.

Molson Coors Beverage (TAP), Anheuser-Busch InBev (BUD), Brown-Forman (BF.A) and Boston Beer (SAM) are down in sympathy.

And Signet Jewelers (SIG) is up after sliding past estimates with its second quarter earnings.

For Q3, Signet sees revenue of $1.34 billion to $1.38 billion (midpoint $1.36 billion) vs. $1.34 billion consensus.

Looking to the markets, rates are moving higher amid a global bond selloff.

The 30-year Treasury yield (US30Y) climbed as high as 4.98%, its highest level since July, as the possibility of the U.S. having to refund tariff money arose after Friday’s court ruling.

The selloff was even sharper in the UK, where the 30-year gilt yield jumped to its highest level since 1998.

Mohamed El-Erian, Allianz chief economic advisor, said: “At 5.69%, this (GILT) yield has increased 35 basis points over the past 30 days and by more than 100 basis points in the past year, highlighting an already difficult fiscal and growth outlook.”

France’s long-dated yields also surged to their highest point since 2009.

And in the Wall Street Research Corner, Bank of America listed the global stock markets that are the most overbought so far this year.

In its weekly Flow Show note, BofA ranked markets based on the deviation from their 200-day moving averages.

The top 5 most overbought are: Greece, Spain, South Korea, Italy and South Africa.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.