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Thu, October 9, 2025

PepsiCo and Delta Report Q3 Results and G-255 Trading Indicators October 9, 2025

Issuer Credit indicator Equity Indicator

PepsiCo Inc (PEP A1/A+ attractive short) unchanged Long below $139.05 / shr

Delta Airlines (DAL Baa2/BBB attractive long) unchanged Long below $54.42 / shr

PepsiCo (PEP, A1/A+, Credit attractive short/equity attractive long at lower price)

Earnings Summary: PepsiCo reported weak 3Q 2025 results, with "organic" unit volume declined -3% YoY and while pricing rose 4% YoY Revenue rose 3% YoY while operating earnings fell -8%

3Q Operating Metrics

  • Frito Lay North America 3Q volume was -4% and net pricing was +2%

  • PepsiCo North America 3Q volume was -4% and net pricing was +6%

  • Non US 3Q volume was flat with pricing +3%

  • 9mos operating cashflow fell -6% to $5.5 billion

  • 9mos net cashflow fell from $3.3 billion to $200mm

Financial Position:

  • Net debt increased 15% YoY to $42.1 billion.

  • Short-term debt fell to $6.7 billion from a record high of $12 billion.

  • PepsiCo did not use balance sheet to repatriate returns to shareholders in 3Q 2025.

Credit Trading Model Indicator:

There are currently 38 liquid secondary USD PEP bonds totalling $32 billion . 3 trading indicators are overvalued and 10 are short trade indicators. The bond with the most spread widening potential is the PEP 4.45 02/15/33. There is a 77% probability of PepsiCo issuing new bonds within the next 20 trading days.

Recent new PepsiCo supply: PEP 5 07/23/35 issued July 21, 2025 +63/10Y and currently trades -3 bp to NIP

Equity Indicator: PEP equity is now attractive long below $139.05 per share.

Delta Airlines (DAL, Baa2/BBB- attractive long credit and equity) 3Q ended September 30

Delta reported operating revenue growth of 4.1% YoY in their third quarter. Operating income rose 21% YoY

3Q Operating Metrics

  • 3Q unit revenue rose .3% YoY

  • 3Q Domestic Revenue rose 5% YoY changed YoY

  • 3Q Cost / Average Seat Mile (before fuel) rose .3% YoY

  • 3Q Fuel costs fell -11% YoY.

  • 3Q Operating cash flow rose 36% to $1.65 bill

  • 3Q Free cash flow rose to $835mm from $35mm in 3Q 2024

Financial Position:

In the quarter, DAL net debt fell by $625mm to $11 billion, despite a 50% YoY increase in its quarterly dividend. As of September, 2025, the company holds approximately $2.1 billion in short-term debt and leases and $3.7 billion in cash.

Credit Trading Model Indicator:

There are currently 8 secondary USD Delta Airlines (DAL) bonds in circulation totaling $7 billion of market capital. None have undervalued trading indicators.

Recent new Delta supply: DAL 5 ¼ 07/10/30 issued June 5, 2025 +130/10Y and currently trades -29 bp to NIP

Equity Trading Model Indicator: DAL Equity remains attractive below $54.42. The equity traded @ $51.13 on August 1

Disclaimer - This report is not intended as, and does not constitute an offer, or a solicitation to buy or sell any securities or financial instruments. All data, levels, opinions, and representations herein are provided for informational purposes only and should not be relied upon for making investment decisions. Past performance is not indicative of future results. The authors of this report assume no liability for losses or damages arising from the use of this information. Investors should consult with a qualified financial advisor before making any investment decisions. The information in this report is based on sources believed to be reliable, but no guarantee is made as to its accuracy, completeness, or timeliness.