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Pepsi Beats Coke, Again

Water Pepsi

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PepsiCo, Inc. is beating the Coca-Cola Company on Wall Street.

PepsiCo’s shares have gained 19.45% for the last twelve months and 49.20% for the last five years, compared to 15.75% and 22.13% for Coca-Cola.

But both companies have underperformed the overall market—see table 1.

Table 1

Pepsi’s Shares Outperform Coke’s On Wall Street

Company 1-year 5-years
PepsiCo (PEP) 19.45* 49.20%*
Coca-Cola (KO) 15.75 22.13
SPDR S&P 500 (SPY) 7.71 51.30

*doesn’t include dividends.

Source: Finance.Yahoo.com 7/10/19

That’s the third year in a row PepsiCo has outperformed Coke on Wall Street—see table 2.

Table 2

Pepsi’s Shares Outperform Coke’s On Wall Street

Company 2-years 5-years
PepsiCo (PEP) 2.95%* 30.64%*
Coca-Cola (KO) -1.45 9.25
SPDR S&P 500 (SPY) 29.24 65.11

*doesn’t include dividends.

Source: Finance.Yahoo.com 7/10/18

Meanwhile, Pepsi beats Coke in Google searches—see table 3.

Table 3

Pepsi Beats Coke In Buzz 7/10/2019

Brand Buzz Google results
Pepsi 164,000,000
Coke 142,000,000

Pepsi’s superior performance on Wall Street may surprise followers and fans of the two brands. Coca-Cola has a stronger brand than PepsiCo. It ranks number 6 on Forbes World’s Most Valuable brands compared to a ranking of 29 for Pepsi—see table 4.

Table 4

PepsiCo And Coca-Cola Ranking In The World’s Most Valuable Brands

Company Rank
PepsiCo 29
Coca-Cola 6

Source: Forbes.com and Finance.yahoo.com 7/13/18

What’s behind PepsiCo’s superior performance on Wall Street? Scale and scope.

PepsiCo is twice the size of Coca-Cola in terms of revenues—see Table 5. And that gives it an efficiency advantage over Coke.  PepsiCo’s Return on Assets, which is higher than those of Coca-Cola—see first table 6.

Table 5

Company Revenues
PepsiCo $64.98B
Coca-Cola $32.25$B

Source: Finance.Yahoo.com 7/10/19

Table 6

Company PEG Ratio Return on Assets Debt to Equity
PepsiCo 5.10 8.61% 232.22
Coca-Cola 4.94 6.60% 230.07

Source: Finance.Yahoo.com 7/10/19

Photographer: Taylor Weidman/Bloomberg

© 2019 Bloomberg Finance LP

Then there’s PepsiCo’s scope–diversification beyond carbonated drinks to snacks, which have been seen strong growth in recent years – has helped.

And things look up in the near future, according to Haris Anwar, Senior Analyst at global financial markets platform Investing.com. “Pepsi stock is in a much better position to outperform Coke in the short-to-medium-term. Pepsi has many positive catalysts helping the beverage company to achieve earnings momentum,” says Anwar.

Photographer: Daniel Acker/Bloomberg

© 2019 Bloomberg Finance LP

He sees the company’s diversification into snack business as a source of competitive advantage over Coke. “For example, its success with snacks is something that Coke hasn’t been able to match, says Anwar. “Its Frito-Lay business, which owns Doritos, Cheetos and Sun Chips, has been showing stronger growth in sales and operating profit  over the past few years. This competitive advantage, coupled with the company’s success from its water business, will continue to help Pepsi stock and keep its momentum going.”

BLOOMBERG NEWS

Meanwhile, Coke is trying to create its own competitive advantage by diversifying into the coffee business. “Coke, on the other hand, will need quickly to diversify its revenue away from sugary soda drinks amid fast changing consumer preferences,” adds Anwar. “Coke’s $5-billion deal to buy UK-based Costa Coffee is one great opportunity for the company to accelerate growth via the most robust segment of the non-alcoholic beverage marketplace. With 3,800 stores, Costa affords Coke a global retail presence and a hedge against slowing soda sales. But it depends how quickly Coke starts to show the benefit of this deal to investors.”

We’ll know a year from now.

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