Competitors
In the second quarter, the beverage and food giant, PepsiCo, reported a net profit of $1.28 per share, up 36% from the same quarter last year. As soda sales declined across the U.S., PepsiCo, Inc. (NYSE:PEP) relied heavily on its food sector, which grew all over the globe.
Unlike Dr Pepper Snapple Group Inc. (NYSE:DPS), PepsiCo has a huge array of products, through which it can generate healthy margins in the future. The same thing happened in the latest quarter. As soda sales dipped in the U.S., the company got out of trouble by selling more still-beverages and snacks.
In contrast to U.S. and Europe, PepsiCo, Inc. (NYSE:PEP)’s soda drinks should continue to show strength in Asia and Africa, amid less health-conscious people. The bottom line is that PepsiCo will continue to grow itself across the globe, making it the best beverage stock in the industry. You can have a look at my detailed take on PepsiCo here.
In order to expand itself in the U.S. market, Coca-Cola has recently gone through some major strategic partnerships. The Coca-Cola Company (NYSE:KO) extended its ongoing partnership with Universal Parks & Resorts a further ten years. Under the new agreement, Coca-Cola will continue to be the official soft drink of Universal Studios Hollywood, Universal Orlando Resort and Universal City Walk Hollywood. The new agreement would also include The Coca-Cola Company (NYSE:KO)’s sports & energy drinks, teas, and juices.
Lately, the company also made an alliance with California Pizza Kitchen, which will enable it to serve Coca-Cola products at CPK’s 202 restaurants throughout the U.S.
Coca-Cola is trading at a forward P/E (1yr) of 17.82 and yields a dividend of 2.8%, making it slightly more expensive than PepsiCo. A mean recommendation of 2.1 on the sell side suggests that it is still one of the best buys in the beverage industry. My complete analysis on Coca-Cola can be found over here.
Conclusion
As the U.S. and Canada continue to abandon carbonated-drinks, Dr Pepper Snapple Group Inc. (NYSE:DPS)’s market share is bound to go down. With no presence in Asia or Africa, the company won’t be able to generate healthy margins in the future. Excessive selling from its insiders and institutional investors depict that the company isn’t a lucrative investment. In short, Dr Pepper Snapple doesn’t look to be in a good shape. Hence, I don’t recommend buying it.
The article This Soda Maker Is Going Down originally appeared on Fool.com and is written by Waqar Saif.
Waqar Saif has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo. Waqar is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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