Coca-Cola vs. PepsiCo: Which Stock is the Better Buy in 2023?
When it comes to the titans of the Consumer Staples sector, Coca-Cola (KO) and PepsiCo (PEP) often come to mind. Both companies have established themselves over decades of successful operations and have rewarded shareholders along the way. These defensive-natured stocks are great for balancing a risk profile as they generate consistent sales in many economic situations and have a track record of increasing quarterly dividend payouts. However, there has been a significant performance disparity between the two companies over the last year, with KO shares widely outperforming PEP. This is illustrated in the chart below, which shows the performance of both stocks over the past year.
To determine which is the better buy currently, let's take a closer look at each company's recent performance and outlook.
PepsiCo Posts Mixed Results
PepsiCo posted mixed results in its latest quarterly release, exceeding sales expectations but falling short of the Zacks Consensus EPS estimate. Sales were down 2%, while EPS of $1.33 fell 10% from the year-ago period. The profitability crunch is notable given how sensitive the stock is concerning margins, with recent geopolitical and tariffs commentary reflecting headwinds. However, the margins picture for the company has overall remained constructive from a longer-term standpoint.
CEO Ramon Laguarta commented 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 stock remains a Zacks Rank #4 (Sell), with EPS revisions moving downward across the board over recent months.
Coca-Cola Keep Climbing
KO's earnings releases have been more positive relative to those from PEP, with Coca-Cola exceeding both its 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).
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 subsequent upward revisions hold more weight in the near-term.
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.
CEO James Quincey 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
While both PepsiCo and Coca-Cola 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.
