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Coca-Cola vs. PepsiCo: What's the Better Buy?

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When thinking of Consumer Staples titans, Coca-Cola (KO - Free Report) and PepsiCo (PEP - Free Report) undoubtedly jump to the forefront of many minds. Both have established themselves over decades of successful operations, also rewarding shareholders nicely along the way.

These defensive-natured stocks are great for balancing a risk profile, as they possess the advantageous ability to generate consistent sales in the face of many economic situations. And they also carry a track record of increasing quarterly dividend payouts, another major perk of targeting these stocks.

Still, there has been a big performance disparity between the duo over the last year, with KO shares widely outperforming. This is illustrated in the chart below.

Zacks Investment Research
Image Source: Zacks Investment Research

It raises a valid question – what’s the better buy currently? Let’s take a closer look at each.

PepsiCo Posts Mixed Results

PepsiCo posted mixed results in its latest quarterly release concerning headline figures, exceeding our sales expectations but falling short of the Zacks Consensus EPS estimate. Sales were down 2%, whereas EPS of $1.33 fell 10% from the year-ago period.

The profitability crunch is quite notable given how sensitive the stock is concerning margins, with the recent geopolitical and tariffs commentary reflecting headwinds. Still, the margins picture for the company has overall remained constructive from a longer-term standpoint, as shown below.

Please note that the chart below tracks margins on a trailing twelve-month basis.

Zacks Investment Research
Image Source: Zacks Investment Research

CEO Ramon Laguarta on the quarter –

“Our businesses remained resilient in the midst of increasingly dynamic and complex geopolitical and macroeconomic conditions in the first quarter. As we look ahead, we expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs. At the same time, consumer conditions in many markets remain subdued and similarly have an uncertain outlook.”

The commentary surrounding the consumer is certainly notable, a key item that investors should be aware of. The stock remains a Zacks Rank #4 (Sell), with EPS revisions moving downward across the board over recent months.

Zacks Investment Research
Image Source: Zacks Investment Research

Coca-Cola Keep Climbing

KO’s earnings releases have been more positive relative to those from PEP, with Coca-Cola exceeding both our consensus EPS and sales expectations in each of its last ten quarters. Shares were up nicely following its latest set of better-than-expected results, with the stock also sporting a favorable Zacks Rank #2 (Buy).

As shown below, analysts have upwardly revised their current year EPS expectations over recent months following a period of downward revisions, a bullish sign concerning near-term share performance. While the current estimate is still lower than where it began a year-ago, the stabilization and the following upward revisions holds more weight in the near-term.

Zacks Investment Research
Image Source: Zacks Investment Research

Concerning headline figures in its latest release, adjusted EPS grew 5% to $0.77, with the company also gaining value share in total nonalcoholic ready-to-drink (NARTD) beverages. Furthermore, organic revenues increased 6% year-over-year, which also included a 5% rise in price/mix.

James Quincey, CEO, said –

“Despite some pressure in key developed markets, the power of our global footprint allowed us to successfully navigate a complex external environment. By remaining true to our purpose and staying close to the consumer, we are confident in our ability to create enduring long-term value.”

Putting Everything Together

PepsiCo (PEP - Free Report) and Coca-Cola (KO - Free Report) remain one of the most polarizing business duos in the market, with each highly popular thanks to decades of successful operations. While both stocks are great targets from a long-term standing given their durability, the setup for Coca-Cola is currently stronger right now, as evidenced by both their Zacks Ranks and recent diverging price action.


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