Pepsico Case Study

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KO = The Coca-Cola Company

DPS = Dr Pepper Snapple Group, Inc.

MDLZ = Mondelez International, Inc.

Industry = Beverages - Soft Drinks

Even though PepsiCo and Coca-Cola are not consider as duopolies but rather as oligopolies as explained earlier, the competition is strongest among those two and they have the highest shares of the market. PepsiCo and Coca-Cola are the two largest corporations in the non-alcoholic beverage industry. Coca-Cola has a market cap of $180 billion, while PepsiCo has a market cap of $136 billion. Coca-Cola focuses exclusively on beverages, not to forget that PepsiCo sells both beverages and food products. The Coca-Cola Corporation and PepsiCo, Inc. offer different benefits depending on investor tastes and goals. Coca-Cola presents a slightly lower risk proposition with a higher dividend yield. PepsiCo has superior growth prospects, better efficiency ratios, more modest implied growth, generally superior relative valuation and more diversification of product offerings. Analysts are generally positive on both companies, and neither is remarkably different from the other in any major financial analysis metric. Overall, PepsiCo has a stronger bull thesis. However, the most attractive element of either thesis is the dividend yield, and Coca-Cola’s dividend yield is materially higher than PepsiCo’s.

Profitability and Growth

Coca-Cola and PepsiCo are both mature companies with modestly positive outlooks, but PepsiCo has a stronger growth profile. Over the 12 months ending June 2015, Coca-Cola’s total revenue declined 1.8%. Net income over the same period declined 17%. PepsiCo’s revenue grew 4% over the 12 months ending June 2015, while net income grew 8.6%. Coca-Cola has delivered 7.7% compounding annual growth over the past 10 years, which is outpaced by PepsiCo’s 8.6%. Analysts expect Coca-Cola’s earnings to grow 5.8% in 2016, with 4.22% compounding annual growth over the next five years. Consensus analyst estimates call for 8.6% earnings per share (EPS) growth from PepsiCo, followed by 5.9% compounding growth over the next five years. Neither company can be considered high-growth, but PepsiCo has a clear edge in historical and expected growth for both the top line and profits.

Coca-Cola has superior margins to PepsiCo. Coca-Cola’s trailing 12-month gross margin of 61% is 600 basis points higher than the 54.1% notched by PepsiCo. The earnings before tax margin gap, is even wider, with Coca Cola's 22.1% besting PepsiCo’s 13.4% by 970 basis points.

Please note that those comparisons are not year-ended 2015 but during the second quarter of the year, so you will find variations in the numbers between all the tables since they are of different periods.

References: https://finance.yahoo.com/q/co?s=PEP

http://www.investopedia.com/articles/markets/092115/cocacola-vs-pepsico-which-stock-should-you-buy.asp