When thinking of legendary rivals, PepsiCo (PEP - Free Report) and The Coca-Cola Company (KO - Free Report) undoubtedly come to the forefront of many minds.
After all, they’re both titans in the Zacks Consumer Staples sector, which has performed at a much higher level than the general market in 2022. This is shown in the chart below.
With similar product catalogs, it raises a valid but potentially tricky question – which company’s shares currently appear more attractive?
Let’s take a deeper dive to get a more evident answer.
Share Performance
By looking at each company’s share performance, we can see which has seen more bullish action and which investors have preferred to buy.
From a longer-term perspective (last five years), PEP shares have tacked on nearly 80% in value vs. KO’s nearly 65% gain. Still, both performances have outpaced the S&P 500’s gain of roughly 63% in the same timeframe.
Upon shrinking the timeframe to encompass just the last six months of price action, we can see that PEP shares have again outperformed KO shares, up more than 13% vs. Coca-Cola’s 5% gain.
While PepsiCo shares have been stronger across several timeframes, both stocks have provided market-beating returns, undoubtedly a major positive.
Valuation
Of course, valuation must always be addressed. Currently, PEP shares trade at a 26.9X forward earnings multiple, whereas KO shares currently trade at a 25.6X forward earnings multiple.
Both values reside above their respective five-year medians and the S&P 500 average, indicating that investors will pay a premium for shares of both companies. Still, KO shares are slightly cheaper than PEP shares.
Dividends
Dividends provide a solid boost to any portfolio, limiting the impact of drawdowns and providing a passive income stream.
Impressively, KO and PEP are both Dividend Kings, showing an unparalleled commitment to their shareholders through 50+ consecutive years of increased dividend payouts.
Currently, PepsiCo’s annual dividend yields 2.5% vs. KO’s 2.8%, a modest difference.
However, there’s a notable difference regarding each company’s dividend growth; PEP’s 6.5% five-year annualized dividend growth rate handily outpaces KO’s 3.1%.
Growth Outlook
Undoubtedly important is the growth trajectory of each company. After all, if a company isn’t growing, why would an investor want to buy?
Currently, the Zacks Consensus EPS Estimate for PepsiCo's current fiscal year (FY22) indicates Y/Y growth of roughly 8%. And in FY23, earnings are forecasted to tack on a further 7.3%.
Regarding Coca-Cola, earnings are forecasted to climb 6.5% in its current fiscal year (FY22) but decline a marginal 0.4% in FY23.
PepsiCo undoubtedly wins this round, with forecasted earnings growth for both its current and next fiscal year.
Bottom Line
The Coca-Cola Company (KO - Free Report) and PepsiCo (PEP - Free Report) are undoubtedly titans in the Zacks Consumer Staples sector, with market caps north of $200 billion.
Still, with similar operations, investors may be left wondering which company’s shares would provide a better bang for their buck.
In this heavyweight battle, PepsiCo appears to come out on top. Here’s why: the company carries stronger dividend growth, a more robust earnings outlook, and PEP shares have been visibly stronger across several timeframes.
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When thinking of legendary rivals, PepsiCo (PEP - Free Report) and The Coca-Cola Company (KO - Free Report) undoubtedly come to the forefront of many minds.
After all, they’re both titans in the Zacks Consumer Staples sector, which has performed at a much higher level than the general market in 2022. This is shown in the chart below.
With similar product catalogs, it raises a valid but potentially tricky question – which company’s shares currently appear more attractive?
Let’s take a deeper dive to get a more evident answer.
Share Performance
By looking at each company’s share performance, we can see which has seen more bullish action and which investors have preferred to buy.
From a longer-term perspective (last five years), PEP shares have tacked on nearly 80% in value vs. KO’s nearly 65% gain. Still, both performances have outpaced the S&P 500’s gain of roughly 63% in the same timeframe.
Upon shrinking the timeframe to encompass just the last six months of price action, we can see that PEP shares have again outperformed KO shares, up more than 13% vs. Coca-Cola’s 5% gain.
While PepsiCo shares have been stronger across several timeframes, both stocks have provided market-beating returns, undoubtedly a major positive.
Valuation
Of course, valuation must always be addressed. Currently, PEP shares trade at a 26.9X forward earnings multiple, whereas KO shares currently trade at a 25.6X forward earnings multiple.
Both values reside above their respective five-year medians and the S&P 500 average, indicating that investors will pay a premium for shares of both companies. Still, KO shares are slightly cheaper than PEP shares.
Dividends
Dividends provide a solid boost to any portfolio, limiting the impact of drawdowns and providing a passive income stream.
Impressively, KO and PEP are both Dividend Kings, showing an unparalleled commitment to their shareholders through 50+ consecutive years of increased dividend payouts.
Currently, PepsiCo’s annual dividend yields 2.5% vs. KO’s 2.8%, a modest difference.
However, there’s a notable difference regarding each company’s dividend growth; PEP’s 6.5% five-year annualized dividend growth rate handily outpaces KO’s 3.1%.
Growth Outlook
Undoubtedly important is the growth trajectory of each company. After all, if a company isn’t growing, why would an investor want to buy?
Currently, the Zacks Consensus EPS Estimate for PepsiCo's current fiscal year (FY22) indicates Y/Y growth of roughly 8%. And in FY23, earnings are forecasted to tack on a further 7.3%.
Regarding Coca-Cola, earnings are forecasted to climb 6.5% in its current fiscal year (FY22) but decline a marginal 0.4% in FY23.
PepsiCo undoubtedly wins this round, with forecasted earnings growth for both its current and next fiscal year.
Bottom Line
The Coca-Cola Company (KO - Free Report) and PepsiCo (PEP - Free Report) are undoubtedly titans in the Zacks Consumer Staples sector, with market caps north of $200 billion.
Still, with similar operations, investors may be left wondering which company’s shares would provide a better bang for their buck.
In this heavyweight battle, PepsiCo appears to come out on top. Here’s why: the company carries stronger dividend growth, a more robust earnings outlook, and PEP shares have been visibly stronger across several timeframes.
Just Released: Zacks Top 10 Stocks for 2024
Hurry – you can still get in early on our 10 top tickers for 2024. Hand-picked by Zacks Director of Research, Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2023, the Zacks Top 10 Stocks gained +974.1%, nearly TRIPLING the S&P 500’s +340.1%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2024. You can still be among the first to see these just-released stocks with enormous potential.
See New Top 10 Stocks >>
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