The similarities between The Coca-Cola Company (NYSE: KO) and PepsiCo, Inc. (NYSE:PEP) go well beyond their identical-tasting colas. From their pricing strategies to their scramble for market shares, these two continue to fight an intriguing battle over decades and decades. In the wake of recent earnings releases by The Coca-Cola Company (NYSE:KO) and PepsiCo, let us take a closer look at what these two giants have in store for investors.
Both companies have similar price-to-earnings ratios of just over 19, and both have their stock valued at approximately 16 times their forward earnings (The Coca-Cola Company (NYSE:KO) just above 16, and PepsiCo just below). And what’s more, both companies offer solid prospects for long-term investors.
A big swig of Coca-Cola
For the fourth quarter, The Coca-Cola Company (NYSE:KO) reported net income of $1.87 billion, or $0.41 per share, up from $1.66 billion, or $0.36 per share last year. Revenue increased by 4% to $11.46 billion.
Analysts were expecting earnings of around $0.44 per share on revenue of $11.53 billion. Global volumes were up 3% vis-à-vis analyst expectations of around 3.9%. So the results were a mixed bag as far as analyst expectations were concerned, but in line with the company’s growth targets. There was some weakness noted in the stock price following the earnings release, but this should not concern the long-term investors.
There were in fact a few very strong pointers that we noted, most importantly the solid results in emerging markets like Thailand, India, and Russia. The Coca-Cola Company (NYSE:KO) achieved volume growth of 22%, 16%, and 8%, respectively, for the full year. China grew 4% affected by bad weather, slowing economy, and a later Chinese new year.
The company will continue to focus on these markets, where consumption of Coca Cola brands is less than 150 eight-ounce servings annually. In the US, the consumption is around 403 such servings per year. Coke is also trying to augment its business of non-carbonated drinks, and it stands to gain significantly from its unparalleled distribution network.
A taste-test for PepsiCo
Meanwhile, PepsiCo reported solid fourth-quarter results, beating analyst estimates. The company earned $1.66 billion, or $1.06 per share, against $1.42 billion or $0.89 per share a year ago. Revenue was $19.95 billion, down 1% from last year. However, organic revenue was up 5%, driven by 9% growth in developing and emerging markets. The analysts were expecting earnings of $1.05 per share on revenue of $19.7 billion. The company’s earnings beat led to a rise in Pepsi’s share price.