In the beverage industry, no one can stand up to PepsiCo, Inc. (NYSE:PEP) and The Coca-Cola Company (NYSE:KO) due to their massive production, distribution systems, and most importantly, the brand value attached with them. Monster Beverage Corp (NASDAQ:MNST) has successfully emerged as the world’s second-largest energy drink company (behind Red Bull). Buying the shares of these companies presents a predicament for investors as the companies are solid dividend payers. However, do they perform better than the market averages and other stocks available on the market?
Recent events
For The Coca-Cola Company (NYSE:KO), over the last five quarters, the company’s revenue has been stagnant, hovering at $11 billion quarterly. The position is getting worse for its shareholders as since Q2 2012, the EPS has been declining. However, Coca-Cola reported a better than expected EPS for the last quarter, and its current EPS is $1.97. Over the last 10 years, the company’s sales have been doubled at least. However, if the current crunch continues in the near future, any revenue growth will be stifled.
PepsiCo, Inc. (NYSE:PEP)’s stock has been up 27% over the past 12 months despite having to deal with weak North American sales like its primary competitor, The Coca-Cola Company (NYSE:KO). Similar to Coca-Cola, its EPS is also alarming about the company’s weakness as it faltered in the preceding two quarters. On revenue, PepsiCo has outperformed The Coca-Cola Company (NYSE:KO) as its quarterly sales are much higher on the back of renewed marketing efforts, including its first bottle redesign in 17 years. Its latest annual EPS stands at $3.92.
Energy drink producer Monster Beverage Corp (NASDAQ:MNST) reported disappointing first-quarter results with lower revenue growth and a failure of cost containment. Net income declined 17% when compared to the previous year. The earnings were largely short of the Zacks consensus estimate of $0.47 per share. Moreover, Monster Beverage has disappointed its investors in each of the last four quarters, with an average negative surprise of 11%.
Complaints against its energy beverages have been fairly elevated over the past years. San Francisco’s city attorney is now suing Monster Beverage Corp (NASDAQ:MNST) for marketing its energy drinks to children, saying the products provoke severe health risks.
Competition
Based on average stock market metrics, PepsiCo, Inc. (NYSE:PEP) and The Coca-Cola Company (NYSE:KO) look undervalued (good time to Buy), whereas Monster Beverage Corp (NASDAQ:MNST) is overvalued (good time to Sell).
| Indicator | PepsiCo | Coca-Cola | Monster Beverage |
|---|---|---|---|
| Price/Earnings ttm | 21.5 | 22.5 | 32.6 |
| Price/Book | 5.8 | 5.9 | 14.0 |
| Net Income Growth (3 Yr Avg.) | 1.3 | 9.7 | 17.7 |
| Revenue Growth (3 Yr Avg.) | 14.9 | 15.7 | 21.7 |
| Dividend Yield , % | 2.71% | 2.61% | – |
| Debt/Equity | 1.0 | 0.4 | – |
| Return on Equity | 27.1 | 26.7 | 37.0 |
| Current Price | $83. 81 | $42.98 | $59.26 |
However, there is an inherent security about PepsiCo, Inc. (NYSE:PEP) and The Coca-Cola Company (NYSE:KO) regarding their performances in driving revenues, which will fuel their stock price. PepsiCo, however, has a high debt/equity ratio. That being said, the two stocks are very closely matched. Coca-Cola’s performance has been worse than PepsiCo’s, though it does seem to be clawing its way back up for now and provides a good opportunity to buy the stock. Monster Beverage Corp (NASDAQ:MNST) has strong profitability margins that are among the strongest in a market comparison.
