Why PepsiCo Stock Withered on Wednesday

Like any trade dispute, the current one between the U.S. and some of our most high-profile trading partners is affecting companies disproportionally. Those affected by the goods slapped with levies are facing struggles, while those unaffected can breathe a sigh of relief.

Unfortunately for PepsiCo (NASDAQ: PEP), it is in the former category. Compounding that, on Hump Day it was also buffeted by a recommendation downgrade. As a result, its share price fell by nearly 3% on a day when the S&P 500 index recovered by notching a 0.5% gain.

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Exemptions requested

Reuters reported that a group of top American food and drink makers formally requested that President Donald Trump exempt a range of comestible inputs from the current round of tariffs. These ingredients include such items as cocoa, used in the manufacture of chocolate, and fruit.

In a letter to the President, PepsiCo and peers such as J.M. Smucker and Conagra Brands asked that "Trump exempt ingredients not available from U.S. sources to protect manufacturers who otherwise buy from domestic farmers and suppliers," the news agency wrote.

Reuters added that the companies are requesting that Trump engage in a "targeted and carefully calibrated removal" of these items. In their view, this would serve to both protect American food and drink manufacturers, and reduce consumer inflation.

A prognosticator gets more bearish

The letter drew attention to PepsiCo's current vulnerability with inputs, while the analyst's downgrade highlighted ongoing struggles.

The company behind the downgrade was Jefferies, which now feels that PepsiCo only rates a hold rather than a buy as it previously believed. According to reports, the company cited general weakness and losses in market share as key reasons why an expected turnaround is taking longer to materialize.

This new analysis is concerning, as is the potential fallout from even a limited trade war. This might very well be a stock to avoid for the moment.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends J.M. Smucker and Jefferies Financial Group. The Motley Fool has a disclosure policy.