As worries about a possible recession grow, investors are keeping a close eye on insider trading for hints about what executives might be thinking.
Recently, insiders at PepsiCo (PEP) and Yum! Brands (YUM) sold significant amounts of stock, raising eyebrows.
For example, PepsiCo’s Senior Vice President and Controller Marie Gallagher sold 25,000 shares of the company at $159.55 per share for a total value of about $3.9 million. Meanwhile, Yum! Brands has also seen insider selling activity, with CEO David Gibbs offloading 30,604 shares on March 5 for a total value of $4.8 million.
Are these insider sales routine adjustments or signs of deeper concerns? Let’s dive in.
Stock #1: PepsiCo (PEP)
PepsiCo (PEP) is one of the world’s largest food and beverage companies, with famous brands like Pepsi, Lay’s, and Tropicana. Despite its strong reputation, PepsiCo’s stock has had a tough time recently, dropping 14% over the past year and 3% in the year-to-date.
Its valuation shows a forward P/E ratio of 18.25x, slightly higher than the sector average of 16.22x, which could mean the stock is somewhat expensive compared to its peers. On the bright side, PepsiCo offers a solid dividend yield of 3.67%, with an annual payout of $5.42 per share.
PepsiCo’s latest financial results for Q4 were mixed. The company reported modest revenue growth of 0.4% for the full year, but Q4 revenue was down 0.2% year-over-year. Earnings per share rose by 6% to $6.95 for the year, and were up a more generous 17% YOY in the fourth quarter.
Looking ahead, management expects slower growth in 2025, with low-single-digit organic revenue increases and mid-single-digit EPS growth in constant currency terms.
PepsiCo has also been making strategic moves to strengthen its position. It expanded its partnership with Madison Square Garden Entertainment (MSGE) and acquired Siete Foods for $1.2 billion to tap into healthier snack options. However, recent insider sales have raised concerns.
While insiders sell for many reasons, the lack of insider buying over the past year adds to investor worries about whether the stock is overvalued. Peter Lynch, the renowned investor, once said, “Insiders might sell their shares for any number of reasons, but they buy them for only one: They think the price will rise.”
Analysts are cautiously optimistic about PepsiCo’s future, with 20 analysts giving it a consensus “Moderate Buy” rating with an average price target of $163.21, about 11% higher than its current price.
Still, recent insider activity and broader economic uncertainties make investors wonder if PepsiCo can weather the challenges ahead.
Stock #2: Yum! Brands (YUM)
Yum! Brands (YUM) is a global leader in the quick-service restaurant industry, operating iconic brands like KFC, Taco Bell, Pizza Hut, and Habit Burger Grill across over 57,000 locations in 155 countries. By using a mostly franchised business model, Yum! ensures steady income while keeping operational costs low.
Despite economic uncertainty, YUM stock has shown remarkable strength, rising 14.8% over the past year and delivering a 17.5% return year-to-date.
Its forward P/E ratio is 26.25x, much higher than the sector average of 15.02x, suggesting that investors expect strong growth. The annual dividend yield is 1.8%, with a forward payout of $2.84 per share.
In its Q4 2024 earnings report, Yum! reported GAAP EPS of $1.49 and adjusted EPS of $1.61, beating expectations. Full-year GAAP EPS rose to $5.22, a 6% increase from the previous year.
Sales grew 8% in Q4, driven by Taco Bell’s 14% increase and KFC’s international expansion. Digital sales exceeded $9 billion, with over 50% of sales coming from digital channels, marking significant progress toward fully digital sales.
Yum! recently introduced “Byte by Yum!,” an AI-driven platform to improve restaurant operations through tools like inventory management and kitchen optimization. CEO David Gibbs highlighted its potential to enhance customer experiences and streamline operations. This move aligns with Yum!’s focus on using technology to drive growth.
Insider trading at Yum! has caught attention, with CEO David Gibbs selling shares on March 5, 2025. This is part of a broader trend of insider sales over the past year. Barchart data tracks 35 insider sales over the past 12 months and 0 insider buys. However, Gibbs directly held more than 160,000 shares after the March 5 purchase, so he is still a significant investor.
Analysts are cautiously optimistic, with 27 analysts giving Yum! a consensus “Moderate Buy” rating with an average price target of $154.79, just above its current price, suggesting limited upside potential.
Conclusion
Overall, the recent insider selling activity in PepsiCo and Yum! Brands raises important questions about corporate sentiment amid economic uncertainty. Despite their strong market positions and innovative strategies, these transactions suggest caution from insiders regarding near-term challenges. Investors should weigh these developments carefully, as broader recession fears may continue to influence market dynamics in the coming months.
