Is PepsiCo A Better Stock Than Coca-Cola?

Group 1: Stock Performance - PepsiCo's stock has decreased by 10% this year, while Coca-Cola's stock has risen by 16%, primarily due to PepsiCo's sluggish North American operations [2] - Since early January 2021, Coca-Cola's stock has increased approximately 40%, while PepsiCo's stock has only risen about 4% [10] - Both Coca-Cola and PepsiCo underperformed relative to the S&P 500 in 2021, 2023, and 2024, with Coca-Cola showing more consistent positive returns [11] Group 2: Revenue Growth - Coca-Cola achieved a 7% average annual revenue growth from 2021 to 2024, increasing from $38.7 billion to $47.1 billion, while PepsiCo's growth was 5%, rising from $79.5 billion to $91.9 billion [4] - Coca-Cola's revenue growth is driven by strong performance in both at-home and away-from-home channels, supported by effective pricing strategies [5] - PepsiCo's revenue growth was impacted by operational difficulties, including a significant recall in its Quaker Foods division, but it still achieved annual revenue growth [6] Group 3: Profitability Metrics - Coca-Cola's net margin declined from 25.3% to 22.6% from 2021 to 2024, while PepsiCo's net margin increased from 9.6% to 10.4% during the same period [8] - Coca-Cola has a better financial risk profile with a debt-to-equity ratio of 16% compared to PepsiCo's 27% [9] Group 4: Valuation Metrics - PepsiCo's stock trades at 17 times its trailing adjusted earnings of $8.03 per share, significantly lower than its four-year average P/E ratio of 22 times, indicating it is undervalued [12] - Coca-Cola's stock is trading at 25 times its trailing adjusted earnings of $2.89 per share, above its four-year average P/E of 22 times [13] Group 5: Future Outlook - Despite recent challenges, PepsiCo is expected to recover, with revenues anticipated to return to mid-single-digit growth starting next year [14] - Investors seeking reduced volatility may consider alternative investment strategies, such as the High Quality portfolio, which has outperformed the S&P 500 [15]