Financial Contrast: PepsiCo (PEP) versus The Coca-Cola (KO)

PepsiCo (NASDAQ: PEP) and The Coca-Cola (NYSE:KO) are both large-cap consumer staples companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, profitability, institutional ownership, earnings, valuation, dividends and analyst recommendations.

Dividends

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PepsiCo pays an annual dividend of $3.22 per share and has a dividend yield of 3.1%. The Coca-Cola pays an annual dividend of $1.56 per share and has a dividend yield of 3.5%. PepsiCo pays out 61.6% of its earnings in the form of a dividend. The Coca-Cola pays out 81.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. The Coca-Cola has raised its dividend for 55 consecutive years. The Coca-Cola is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and price targets for PepsiCo and The Coca-Cola, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PepsiCo 1 8 5 0 2.29
The Coca-Cola 1 11 11 0 2.43

PepsiCo currently has a consensus price target of $122.23, suggesting a potential upside of 15.78%. The Coca-Cola has a consensus price target of $48.91, suggesting a potential upside of 10.38%. Given PepsiCo’s higher probable upside, research analysts clearly believe PepsiCo is more favorable than The Coca-Cola.

Profitability

This table compares PepsiCo and The Coca-Cola’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PepsiCo 7.65% 61.14% 9.71%
The Coca-Cola 3.52% 38.36% 9.18%

Institutional & Insider Ownership

70.9% of PepsiCo shares are held by institutional investors. Comparatively, 66.1% of The Coca-Cola shares are held by institutional investors. 0.3% of PepsiCo shares are held by insiders. Comparatively, 1.5% of The Coca-Cola shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Earnings and Valuation

This table compares PepsiCo and The Coca-Cola’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PepsiCo $63.53 billion 2.36 $4.86 billion $5.23 20.19
The Coca-Cola $35.41 billion 5.34 $1.25 billion $1.91 23.20

PepsiCo has higher revenue and earnings than The Coca-Cola. PepsiCo is trading at a lower price-to-earnings ratio than The Coca-Cola, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

PepsiCo has a beta of 0.66, indicating that its stock price is 34% less volatile than the S&P 500. Comparatively, The Coca-Cola has a beta of 0.72, indicating that its stock price is 28% less volatile than the S&P 500.

Summary

PepsiCo beats The Coca-Cola on 9 of the 17 factors compared between the two stocks.

About PepsiCo

PepsiCo, Inc. operates as a food and beverage company worldwide. Its Frito-Lay North America segment offers Lay's and Ruffles potato chips; Doritos, Tostitos, and Santitas tortilla chips; and Cheetos snacks, branded dips, and Fritos corn chips. The company's Quaker Foods North America segment provides cereals, rice, pasta, mixes and syrups, granola bars, grits, oat squares, oatmeal, rice cakes, simply granola, and side dishes under the brands Quaker, Aunt Jemima, Cap'n crunch, life, Quaker Chewy, and Rice-A-Roni. Its North America Beverages segment offers beverage concentrates, fountain syrups, and finished goods under the Aquafina, Diet Mountain Dew, Diet Pepsi, Gatorade, Mist Twst, Mountain Dew, Pepsi, Propel, and Tropicana brands; and ready-to-drink tea, coffee, and juices. The company's Latin America segment provides snack foods under the Cheetos, Doritos, Emperador, Lay's, Marias Gamesa, Rosquinhas Mabel, Ruffles, Sabritas, Saladitas, and Tostitos; cereals and snacks under the Quaker brand; and beverage concentrates, fountain syrups, and finished goods under the 7UP, Diet Pepsi, Gatorade, H2oh!, Manzanita Sol, Mirinda, Pepsi, and Toddy brands. Its Europe Sub-Saharan Africa segment offers snack food; cereals and snacks; beverage concentrates, fountain syrups, and finished goods; ready-to-drink tea products; and dairy products under the Agusha, Chudo, and Domik v Derevne brand names. The company's Asia, Middle East and North Africa segment provides snack foods under the Cheetos, Chipsy, Crunchy, Doritos, Kurkure, and Lay's brands; cereals and snacks under the Quaker brand; beverage concentrates, fountain syrups, and finished goods; and ready-to-drink tea products. The company was founded in 1898 and is headquartered in Purchase, New York.

About The Coca-Cola

The Coca-Cola Company, a beverage company, manufactures and distributes various nonalcoholic beverages worldwide. The company provides water, enhanced water, and sports drinks; juices; juice, dairy, and plant?based beverages; teas and coffees; and energy drinks. It also offers concentrates, syrups, beverage bases, source waters, and powders/minerals, as well as fountain syrups to fountain retailers, such as restaurants and convenience stores. The company sells its products primarily under the Coca-Cola, Diet Coke/Coca-Cola Light, Coca-Cola Zero Sugar, Fanta, Sprite, Minute Maid, Georgia, Powerade, Del Valle, Schweppes, Aquarius, Minute Maid Pulpy, Dasani, Simply, Glacéau Vitaminwater, Gold Peak, FUZE TEA, Glacéau Smartwater, Ice Dew, I LOHAS, and Ayataka brand names. The Coca-Cola Company offers its beverage products through a network of company-owned or controlled bottling and distribution operators, as well as through independent bottling partners, distributors, wholesalers, and retailers. The company was founded in 1886 and is headquartered in Atlanta, Georgia.

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