Coca-Cola Vs. PepsiCo: Soda Wars

Seeking Alpha2021-10-11

Summary PEP and KO are peers, but there are still major differences when it comes to product lineups, past performance, etc. Investors should note the approach to shareholder returns that the two ...

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精彩评论

LimYH
2021-10-11
LimYH
KO up to $150
leeWT
2021-10-11
leeWT
Both are the legend drinks
- FJ大哥:
  G
PanaCota
2021-10-11
PanaCota
Ok
lee1234
2021-10-11
lee1234
Like
458fd99c
2021-10-11
458fd99c
Gg
- 458fd99c:
  Gg
1000010101O
2021-10-11
1000010101O
[Smile]

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PepsiCo: Soda Wars","media":"Seeking Alpha","content":"<div>\n<p>Summary\n\nPEP and KO are peers, but there are still major differences when it comes to product lineups, past performance, etc.\nInvestors should note the approach to shareholder returns that the two ...</p>\n\n<a href=\"https://seekingalpha.com/article/4459128-coca-cola-versus-pepsico-soda-wars\">网页链接</a>\n\n</div>\n","source":null,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Coca-Cola Vs. 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PepsiCo: Soda Wars\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-10-11 21:29 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4459128-coca-cola-versus-pepsico-soda-wars><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nPEP and KO are peers, but there are still major differences when it comes to product lineups, past performance, etc.\nInvestors should note the approach to shareholder returns that the two ...</p>\n\n<a href=\"https://seekingalpha.com/article/4459128-coca-cola-versus-pepsico-soda-wars\">网页链接</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"KO","symbol_name":"可口可乐","start_time":0,"source_url":"https://seekingalpha.com/article/4459128-coca-cola-versus-pepsico-soda-wars","article_id":"1161933729","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1161933729","pubTimestamp":1633958941,"columns":[],"sourceInfo":null,"weMediaInfo":null,"summary":"Summary\n\nPEP and KO are peers, but there are still major differences when it comes to product lineup","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"KO":"可口可乐","PEP":"百事可乐"},"translate_title":"可口可乐vs。百事：汽水大战","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"KO":0.9,"PEP":0.9},"content_text":"Summary\n\nPEP and KO are peers, but there are still major differences when it comes to product lineups, past performance, etc.\nInvestors should note the approach to shareholder returns that the two companies employ. PEP looks significantly stronger than KO in that regard.\nShares should never be bought without considering valuation, and neither of the two companies is especially cheap today.\n\nsubjug/iStock via Getty Images\nArticle Thesis\nCoca-Cola (KO) and PepsiCo (PEP) are well-liked consumer staples companies that are widely owned among retail investors due to their reliable dividends. The two differ in terms of their product lineups, relative growth outlook, dividend growth properties, and capital allocation, however. We'll pitch them against each other in this report to see what company ultimately is the better choice.\nCoca-Cola And PepsiCo: Peers, But There Are Important Differences\nCoca-Cola and PepsiCo are mostly known for their famous sodas. Coca-Cola, Sprite, etc. are owned by Coca-Cola, while PepsiCo owns Pepsi, Mountain Dew, etc. Importantly, Coca-Cola is an entirely drinks-focused company, while PepsiCo also owns a sizeable snacks business, which is the first key differentiator between the two companies.\nData by YCharts\nPepsiCo's more diversified business, which gives the company exposure to higher-growth product categories such as snacks, explains why PepsiCo has been able to grow its revenue reliably over the last couple of years. The company's top line rose by more than 20% in total, reaching $77 billion, while Coca-Cola has suffered from adeclinein its revenue over the same time.\nCoca-Cola's top line was also impacted by refranchising efforts, but even adjusted for that, KO clearly underperformed PepsiCo. This is also visible when we look at the performance during the pandemic: PepsiCo was able to grow its revenue reliably, and revenues during the last year were considerably higher than before the crisis. Coca-Cola, meanwhile, was not able to grow its revenue and experienced meaningful sales headwinds.\nThis can be explained by the fact that PepsiCo's product portfolio is more diversified overall, and on top of that, its snacks business continued to do very well during lockdowns when consumers spent more time at home. Coca-Cola, meanwhile, with its larger dependence on soft drinks, was feeling a larger impact -- festivals, sports tournaments, and other large-scale events were canceled, which led to reduced soft drink consumption.\nWhen people stay home, locked down, they still consume a lot of chips, tortillas, etc., while they consume less carbonated drinks - which gave PepsiCo the advantage during the last six quarters, and which is why PepsiCo is the more resilient company among these two.\nLooking at the 10-year growth performance of the two companies, we see that PepsiCo has, again, outperformed its larger peer (in terms of market capitalization):\nData by YCharts\nPepsiCo delivered a 46% earnings per share increase over the last decade, which isn't especially attractive, but the company at least generated a mid-single-digit annual growth rate. Coca-Cola, meanwhile, did not generate any earnings per share growth at all, which is quite underwhelming.\nLooking at current expectations for the coming years, the two companies are expected to showcase relatively similar growth. Coca-Cola is forecasted to grow its earnings per share from $2.25 in 2021 to $3.02 in 2025, while PepsiCo is forecasted to grow its earnings per share from $6.24 in 2021 to $8.06 in 2025 - which pencils out to a four-year increase of around 30% for both companies.\nIf both companies manage to hit current analyst predictions, they would both grow meaningfully faster than they did over the last decade, as annual growth in the high-single-digits has not been achieved by either company.\nEspecially in Coca-Cola's case, it seems somewhat questionable to assume that the company will grow its earnings per share this reliably when the company has not delivered any growth over the last decade. It can, however, be argued that Coca-Cola, due to its more drinks-focused product lineup, might benefit more from global reopening in 2022 and beyond.\nThe growth outlook for the global carbonated soft drinks market and the growth outlook for the global snacks market are relatively similar, at 3%-4% a year through the next couple of years. Translating this market growth into a high-single-digit earnings per share growth rate is possible, but far from certain. It would require constant market share, which is not guaranteed, and additional tailwinds from either margin expansion or share buybacks.\nPepsiCo has somewhat lower gross margins today, at around 55%, whereas Coca-Cola's gross margins are in the low 60s. One could argue that PepsiCo might have more success in expanding its gross margins over the coming years, as Coca-Cola's margins already seem pretty maxed out. Even in PEP's case, further margin expansion is far from certain, however. Overall, I do believe that current growth estimates by the analyst community might be a little aggressive for both companies, and would not be surprised if both do actually grow their profits a little less than expected -- if history is a guide, that seems quite likely.\nShareholder Returns: PEP Versus KO\nBoth companies are owned by many retail investors, for their above-average dividend yields and decades-long dividend growth track records. At current prices, PEP offers a dividend yield of 2.8%, whereas KO offers a dividend yield of 3.1%. At first sight, Coca-Cola is thus the better income investment, but additional factors should be considered.\nBased on current earnings per share estimates for 2021, PepsiCo will pay out 69% of its profits this year, whereas the payout ratio for Coca-Cola is 75%. This means that PepsiCo's dividend looks a little more secure, and on top of that, PepsiCo has more potential to raise its dividend through increases in its payout ratio. PepsiCo's better crisis performance thanks to a more diversified and resilient product portfolio further underlines the fact that its dividend seems to be even more secure than that of Coca-Cola -- although KO's shareholders don't really have to worry about a dividend cut, either.\nPepsiCo also has delivered better dividend growth than Coca-Cola over the last couple of years:\nData by YCharts\nPEP's 5-year dividend growth rate is a little over 7%, whereas KO only hiked its dividend by 3.7% a year, on average. This is, at least partially, the result of KO's weaker earnings growth and its higher payout ratio - PepsiCo, thanks to better growth and a lower payout ratio, had more potential to reward its owners through generous dividend increases. If analysts are correct and earnings growth will be relatively similar between these two, one could imagine that dividend growth will be relatively close over the coming years as well. PepsiCo, due to its lower payout ratio, still should be able to serve up somewhat higher dividend increases, although the gap versus KO's dividend growth rate should narrow.\nExecutives can also return cash to the company's owners through stock buybacks. Looking at the share count of the two companies over the last three years, we see the following:\nData by YCharts\nPepsiCo has reduced its share count by a couple of percentage points, which does translate into a small earnings per share tailwind, all else equal. Coca-Cola, meanwhile, has seen its share count rise over the years, which is what we would expect from a high-growth tech company, but not from a mature consumer staples company. KO has actually spent money repurchasing shares ($100 million in H1 2021, and a similar amount during H1 2020, according to its 10-Q), but the company has issued so many shares that its share count has still been growing.\nThis seems relatively shareholder-unfriendly, and the ongoing dilution - despite cash being diverted to buybacks - plays a role in KO's weak earnings per share growth rate, relative to its peer. If this trend doesn't change, I personally do believe that this could result in further underperformance of KO on a per-share basis - as mentioned above, current analyst estimates might be too bullish.\nWhen we look at insider trades, we see that PEP seems to be a better buy in the eyes of its executives relative to KO:\nSource: nasdaq.com\nPepsiCo's insiders have bought more shares than they sold over the last 3 months and the last twelve months. On a net basis, buying activity has not been overly high, but it still is a positive sign that insiders seem to see value in PEP stock.\nCoca-Cola's insiders, meanwhile, have been on a selling spree:\nSource: nasdaq.com\nBoth over the last three months, as well as over the last year, insiders sold way more shares than they bought. This suggests that insiders do not see too much value in KO's stock. At the same time, this could be the result of massive share issuance to management that is rapidly turned into cash, which would also explain why KO's share count has been climbing while PEP's share count declined.\nOverall, PEP seems like the more shareholder-friendly company where insiders are better aligned with owners. At the same time, in the eyes of those that own the company very well, PEP seems to be more attractively priced -- otherwise execs wouldn't be buying more than they are selling. Coca-Cola does, however, offer a slightly higher dividend yield, which might be the deciding factor for some investors.\nWhich Is The Better Stock To Buy?\nBoth KO and PEP offer a sizeable dividend yield, both companies are active in a relatively resilient industry, and both companies are forecasted to grow at a relatively similar rate over the coming years. Due to its lower dividend payout ratio, higher dividend growth, better track record, declining share count, and due to recent insider buying, I still believe that PEP is the slightly stronger pick right here. PEP's better diversification and its stronger crisis performance are also attractive qualities.\nKO, meanwhile, has underperformed for many years, and due to ongoing shareholder dilution, it seems far from guaranteed that it will be able to close the gap versus PEP when it comes to earnings per share growth. Insiders also do not seem to have a lot of trust in the company's future performance, as they have been selling way more shares than they bought in the recent past.\nThat being said, at a mid-20s earnings multiple, neither of the two companies look especially inexpensive. Investors may want to wait for a better buying opportunity to emerge instead of paying a quite high price for a slow-moving mature company. I am thus slightly more bullish on PEP, but do not consider it a great buy at current prices.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":826910928,"gmtCreate":1633963711899,"gmtModify":1633963712041,"author":{"id":"3586223575744434","authorId":"3586223575744434","name":"LimYH","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3586223575744434","authorIdStr":"3586223575744434"},"htmlText":"KO up to $150","listText":"KO up to $150","text":"KO up to $150","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/826910928","repostId":1161933729,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":826048533,"gmtCreate":1633961048274,"gmtModify":1633961048364,"author":{"id":"3581563058003710","authorId":"3581563058003710","name":"leeWT","avatar":"https://static.tigerbbs.com/49e0521f4fb5a74a66948df0eddb1c8b","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3581563058003710","authorIdStr":"3581563058003710"},"htmlText":"Both are the legend drinks","listText":"Both are the legend drinks","text":"Both are the legend 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