We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Soft Drink Stocks Head-to-Head: PepsiCo vs. Coca-Cola
Read MoreHide Full Article
Beverage companies are introducing a number of changes to their products in response to the varying needs of consumers and shift in preference toward healthier beverages.
Two soft drink giants, The Coca-Cola Company (KO - Free Report) and PepsiCo Inc. (PEP - Free Report) have recently introduced changes in their product line, coming up with a “good-for-you” range.
As Coca-Cola and PepsiCo are in close competition, let us analyze the factors to determine which company is a better investment option.
Market Capitalization: Coca-Cola has a market cap of $180 billion whereas PepsiCo’s market cap stands at $151.8 billion. Market cap largely defines the size of a company. While picking stocks, solely on the basis of size, it is always safe to opt for a larger company, as they get usually give consistent returns. Clearly, on this front, Coca-Cola has an edge over PepsiCo.
Price Performance: In terms of stock price performance, PepsiCo seems to be in a better position. The company’s 4.9% growth is better than the Zacks categorized Beverages/Soft Drink industry’s year-to-date decline of 3.6%. Meanwhile, Coca-Cola has registered a decline of 3% over the same time frame. PepsiCo has also gained more than Coca-Cola over the last six months.
Valuation Metrics: But both stocks are a tad overvalued, as is evident from their unfavorable forward Price to earnings (P/E) ratios compared to the industry. P/E ratios for PepsiCo and Coca-Cola are 21.9 and 21.8, respectively industry’s 19.8. PepsiCo’s shares look a little more expensive compared with Coca-Cola.
Estimate Revision: Upward estimate revision reflects bullish prospects for a stock. However, both these companies’ estimates have remained stable over the past month. Current-year earnings estimates project growth of 5% for PepsiCo while Coca-Cola is expected to see a 4.6% decline in earnings. Moreover, PepsiCo has a positive earnings surprise history for the trailing four quarters, with an average beat of 5.35%. The same for Coca-Cola stands at 2.63%.
Margins: Core gross margin expanded 82 basis points (bps) and core operating margin expanded 85 bps for PepsiCo in the first nine months of 2016. But for Coca-Cola comparable gross margin declined 40 bps and comparable operating margin declined 20 bps over the same period.
Return on Equity: There is a stark difference between the return on equity (ROE) of the companies. PepsiCo boasts a ROE of 56.16%, while the same for Coca-Cola is 32.47%.
Dividends: Coca-Cola has a slight advantage over PepsiCo in terms of dividend payouts. Dividends are usually, but not always, an indication of solid financial health. Coca-Cola has a current dividend yield of 3.36%, better than PepsiCo's 2.86%.
Final Thoughts
Going by the statistics, PepsiCo sure enjoys an edge over Coca-Cola in terms of ROE, margins, earnings growth and price performance. However, the difference in the companies’ key metrics is quite marginal.
PepsiCo has outperformed our earnings estimates by a higher percentage and is expected to register positive earnings growth in 2016. Again, both the companies boast strong brand recognition, focus on product innovation and has a huge international presence, which will likely drive growth, going forward.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Soft Drink Stocks Head-to-Head: PepsiCo vs. Coca-Cola
Beverage companies are introducing a number of changes to their products in response to the varying needs of consumers and shift in preference toward healthier beverages.
Two soft drink giants, The Coca-Cola Company (KO - Free Report) and PepsiCo Inc. (PEP - Free Report) have recently introduced changes in their product line, coming up with a “good-for-you” range.
As Coca-Cola and PepsiCo are in close competition, let us analyze the factors to determine which company is a better investment option.
As both the companies currently carry a Zacks Rank #3 (Hold), we need to delve deeper into the factors beyond rank. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Market Capitalization: Coca-Cola has a market cap of $180 billion whereas PepsiCo’s market cap stands at $151.8 billion. Market cap largely defines the size of a company. While picking stocks, solely on the basis of size, it is always safe to opt for a larger company, as they get usually give consistent returns. Clearly, on this front, Coca-Cola has an edge over PepsiCo.
Price Performance: In terms of stock price performance, PepsiCo seems to be in a better position. The company’s 4.9% growth is better than the Zacks categorized Beverages/Soft Drink industry’s year-to-date decline of 3.6%. Meanwhile, Coca-Cola has registered a decline of 3% over the same time frame. PepsiCo has also gained more than Coca-Cola over the last six months.
Valuation Metrics: But both stocks are a tad overvalued, as is evident from their unfavorable forward Price to earnings (P/E) ratios compared to the industry. P/E ratios for PepsiCo and Coca-Cola are 21.9 and 21.8, respectively industry’s 19.8. PepsiCo’s shares look a little more expensive compared with Coca-Cola.
Estimate Revision: Upward estimate revision reflects bullish prospects for a stock. However, both these companies’ estimates have remained stable over the past month. Current-year earnings estimates project growth of 5% for PepsiCo while Coca-Cola is expected to see a 4.6% decline in earnings. Moreover, PepsiCo has a positive earnings surprise history for the trailing four quarters, with an average beat of 5.35%. The same for Coca-Cola stands at 2.63%.
Margins: Core gross margin expanded 82 basis points (bps) and core operating margin expanded 85 bps for PepsiCo in the first nine months of 2016. But for Coca-Cola comparable gross margin declined 40 bps and comparable operating margin declined 20 bps over the same period.
Return on Equity: There is a stark difference between the return on equity (ROE) of the companies. PepsiCo boasts a ROE of 56.16%, while the same for Coca-Cola is 32.47%.
Dividends: Coca-Cola has a slight advantage over PepsiCo in terms of dividend payouts. Dividends are usually, but not always, an indication of solid financial health. Coca-Cola has a current dividend yield of 3.36%, better than PepsiCo's 2.86%.
Final Thoughts
Going by the statistics, PepsiCo sure enjoys an edge over Coca-Cola in terms of ROE, margins, earnings growth and price performance. However, the difference in the companies’ key metrics is quite marginal.
PepsiCo has outperformed our earnings estimates by a higher percentage and is expected to register positive earnings growth in 2016. Again, both the companies boast strong brand recognition, focus on product innovation and has a huge international presence, which will likely drive growth, going forward.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>