PEP Stock Alert: KFC Just Dealt PepsiCo a Blow With New Coca-Cola Deal

PepsiCo (PEP) shares are on track to close higher on Oct. 16 despite losing KFC’s U.S. beverage business to its staunch rival: Coca-Cola (KO). The fried-chicken chain announced the Coca-Cola partnership this morning, with the switch beginning in January. KFC expects all 3,600 of its U.S. locations to be serving Coca-Cola by spring 2027. 

The announcement comes as PepsiCo stock is struggling to regain momentum, currently down about 22% versus its year-to-date high in early February. 

Significance of the KFC Announcement for PEP Shares

KFC’s departure costs PepsiCo both sales and valuable exposure at restaurant counters. According to a Bank of America estimate, the account represents about $500 million in annual sales. 

Meanwhile, Jefferies analysts see an even broader concern: losing such an established client could encourage rivals to pursue other longstanding PepsiCo relationships as well. 

Note that the switch is limited to KFC’s U.S. business only; PepsiCo retains the international KFC deal and its separate Taco Bell partnership. That said, the timing nonetheless is uncomfortable. PepsiCo’s North America beverage volume fell 2% in its latest reported quarter, excluding acquisitions and divestitures. 

Losing a major distribution channel complicates its efforts to rebuild demand and gives Coca-Cola more opportunities to establish habitual purchases among diners heading into 2027.

Is It Worth Buying PepsiCo Stock Heading into 2027?

PepsiCo shares deserve consideration from income investors, but the firm’s turnaround still needs proof. 

Its lucrative dividend yield of 4.52% offers a tangible reason to wait for improvement, especially since a 3.1% organic revenue growth in Q3 suggests the company’s business continues to expand. 

However, a 35-basis-point contraction in core operating margin, and management's reduced 2026 guidance for earnings per share (EPS) growth of 3% warrants caution in playing PEP heading into the new year. 

How Wall Street Recommends Playing PepsiCo

Heading into Oct. 16, Wall Street had a consensus "Moderate Buy rating on PEP stock, with a bullish mean price target of about $142. 

But it is fairly reasonable to expect downward revisions in the weeks ahead as analysts attempt to bake in this KFC blow into their forward estimates.  

On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.