Stephanie Link on Q1 Earnings: Pepsi, IBM, and Chipotle Analysis

PepsiCo Earnings Analysis

• ⚠️ PepsiCo reported an earnings miss, with restructuring also noted as a negative factor.
• 📉 Focus is on North America volumes, which were expected to be down 3.5%, and the stock has underperformed, down 17% in the past year.
• ❓ The current valuation of 17 times earnings is at the low end, but the speaker questions the value given the earnings miss and declining volumes, making it a "no touch" for now.

GLP-1 Drugs vs. Tariffs

• 💊 GLP-1 drugs, particularly for weight loss, are considered a bigger headwind than tariffs for consumer packaging companies.
• 📈 The success of the pill version of a weight loss drug from Eli Lilly is highlighted as a significant factor.
• ⚖️ Tariffs are seen as potentially more of a one-time adjustment, while GLP-1s represent a more sustained challenge.

IBM's Performance and Outlook

• 💡 IBM reported solid numbers, with its consulting and infrastructure businesses performing better than expected.
• 📉 The stock's decline is attributed to software growth decelerating to 9% from 11%, though reacceleration is expected next quarter.
• 🛡️ IBM is considered a safe haven due to low import reliance, and its stock has been a stellar performer year-to-date, up 10% while semiconductors and software stocks are down.
• 💰 The company is investing heavily in AI, with $6 billion invested this quarter, and reiterated its free cash flow projection of $13.5 billion for the full year, making it a buy on a pullback.

Chipotle's Customer Behavior and Forecast

• 📉 Chipotle reported negative same-store sales (-0.4%), a significant deceleration from mid-single-digit growth in previous quarters.
• 🚶 The company is experiencing a lack of customer traffic, leading to a lowered sales growth forecast.
• 📈 Chipotle may need to increase advertising spend and introduce new products, but throughput improvements could lead to margin expansion.