03:15 PM EDT, 07/11/2025 (MT Newswires) -- PepsiCo's ( PEP ) Q2 growth is expected to be driven entirely by international markets while North America remains "challenged," a trend similar to the past several quarters, UBS Securities said.

The firm forecast Q2 organic sales growth of 1.3%, about 40 basis points below consensus, with volume down 1.6% and gains from pricing and product mix up 2.9%. International performance, which accounts for about 40% of the business, to remain strong, while tracked trends in North America have deteriorated further this spring.

"The core debate centers around PepsiCo's ( PEP ) ability to turn around its struggling North American business," UBS said in a note Thursday, noting that Frito-Lay North America and PepsiCo Beverages North America continue to face headwinds. The firm does not expect this to change meaningfully after the quarterly results.

Despite the near-term outlook remaining mixed and challenging, UBS maintained a positive long-term view, citing a path to low- to mid-single-digit organic revenue growth and mid- to high-single-digit adjusted earnings gains over time.

The firm also highlighted that PepsiCo ( PEP ) shares are trading at about a 23% discount to large-cap multinationals, compared with a long-term historical average premium of 1%, suggesting the valuation still offers upside potential relative to risks.

The brokerage expects PepsiCo's ( PEP ) fiscal 2025 outlook to remain unchanged, projecting earnings per share of about $7.92, reflecting flat growth on a constant-currency basis with a 3% foreign exchange headwind and low-single-digit organic growth.

UBS noted that while the tariff and currency outlook has improved since late April, any modest upside is likely to be reinvested in the business rather than boost earnings.

The firm maintained its buy rating on the stock with a price target of $169.

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