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Coca-Cola vs. PepsiCo: Which Stock Has More Fizz?

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The Zacks Consumer Staples Sector has displayed remarkable resiliency in 2022, down 14% vs. the general market’s decline of more than 20%.

Stocks in the sector carry the remarkable ability to generate revenue in the face of good and bad economic environments, helping explain why the sector has been a bright spot in an otherwise dim market in 2022.

Two titans in the sector with similar product catalogs, PepsiCo (PEP - Free Report) and Coca-Cola (KO - Free Report) , currently sport a Zacks Rank #2 (Buy), telling us that analysts have upped their near-term earnings outlook as of late.

It raises a valid question – as investors continue to defend these stocks in a historically-volatile market, which company would provide a better bang for your buck? Let’s take a closer look.

Share Performance

Over the last year, the shares of both companies have been notably strong, easily outperforming the general market.

Still, PEP’s nearly 12% gain edges out KO’s 9% increase.

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Image Source: Zacks Investment Research

Over the last three months, the story remains the same – PEP shares have been notably more defensive than Coca-Cola shares, down 3% vs. KO’s 12% decline.

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Image Source: Zacks Investment Research

The difference in price action between the shares of both companies tells us buyers have defended PEP shares much more, undoubtedly a significant factor.

Valuation

Pivoting to valuation, both companies sport a Value Style Score of a C.

KO shares currently trade at a 22.7X forward earnings multiple, nicely below their five-year median of 24.6X.

On the contrary, PEP shares trade at a 24.5X forward earnings multiple, just above their five-year median of 24.1X.

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Image Source: Zacks Investment Research

While PEP shares have enjoyed stronger price action, KO shares are slightly cheaper, trading below their five-year median.

Growth Estimates

Of course, growth is a key factor in selecting any stock.

For KO’s current fiscal year, earnings and revenue are forecasted to climb 6% and 9.8%, respectively.

 

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Image Source: Zacks Investment Research

Pivoting to PEP, earnings are projected to climb 6.4% in FY22 on top of forecasted revenue growth of 5.6%.

 

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Image Source: Zacks Investment Research

However, PEP’s FY23 estimates are stronger than KO’s, with PepsiCo’s bottom-line forecasted to expand 8.5% in FY23 vs. KO’s projected 5% uptick.

Revenue estimates paint the same story for FY23; PEP’s forecasted Y/Y revenue growth of 3.6% in FY23 marginally beats KO’s 3.1% projected growth rate.

While Coca-Cola is forecasted to have a stronger year of growth in FY22, PepsiCo’s FY23 estimates pick up the slack.

Dividends

Dividends are a massive factor in selecting any stock. After all, who doesn’t enjoy getting paid?

Impressively, KO and PEP are both Dividend Kings, showing an unparalleled commitment to their shareholders through 50+ consecutive years of increased dividend payouts.

KO’s 3.1% annual dividend yield is notably higher than PepsiCo’s 2.8%.

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Image Source: Zacks Investment Research

However, PEP has grown its dividend at a much stronger pace; the company carries a 6.5% five-year annualized dividend growth rate vs. Coca-Cola’s 3%.

While the yield may be lower for PEP shares, the dividend growth is undoubtedly the real highlight and an additional factor that differentiates the two.

Bottom Line

It’s the battle of the beverage titans, and it’s looking to go to the judge’s scorecard.

Both companies are absolute titans within the Zacks Consumer Staples Sector, with years and years of established operations.

PepsiCo (PEP - Free Report) has had a more robust performance in the market as of late, carries higher dividend growth metrics, and has a stronger growth profile for the next fiscal year.

On the other hand, Coca-Cola (KO - Free Report) shares appear to be cheaper, and the company has a more fruitful growth outlook for the current fiscal year. It’s worth noting that both companies’ fiscal years end in December.

In addition, both carry a favorable Zacks Rank, undoubtedly significant positives.

With volatility reigning supreme in the market all year long, both look to be solid picks for those who need defense blended into their portfolios.


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CocaCola Company (The) (KO) - free report >>

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