Two iconic titans within the beverages industry, Coca-Cola (KO) and PepsiCo (PEP) have recently released their Q4 results for fiscal 2023. Here’s a comprehensive analysis to help investors decide which stock is the better buy at the moment.
Coca-Cola Q4 Review
Coca-Cola reported Q4 results this morning, beating both top and bottom-line expectations. Despite a 1% decrease in volume in its core North American segment, the company achieved fourth-quarter earnings of $0.49 per share, surpassing the Zacks Consensus by 2% and marking a 9% year-over-year increase. Q4 sales of $10.84 billion also exceeded estimates by 2% and rose 7% from the comparative quarter.
Coca-Cola has consistently exceeded earnings expectations in the past four quarters and has topped sales estimates for 12 consecutive quarters. Overall, its total sales grew by 6% in FY23 to $45.8 billion, with annual earnings rising 8% to $2.69 per share.
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Pepsi Q4 Review
Pepsi also reported slower U.S. sales in its Q4 results, with its North American beverage volume declining by 6%. Although the company missed top-line estimates for the first time since 2018, it managed to beat earnings expectations. Quarterly sales of $27.85 billion slightly missed estimates and were slightly down from the previous year, marking Pepsi’s first revenue decline in almost four years.
In regard to Pepsi’s snack business, its Quaker Foods and Frito-Lay North American segments also experienced lower volumes. However, Q4 earnings of $1.78 per share came in 3% better than expected and rose by 6% year-over-year. Despite the sales shortfall, Pepsi has now surpassed earnings estimates for eight consecutive quarters. Furthermore, its total sales were up by 6% in FY23 to $91.47 billion, with annual EPS increasing by 12% to $7.62 per share.
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Fiscal 2024 Guidance
In their guidance for FY24, Coca-Cola forecasts revenue growth of 6-7% and a 4-5% increase in EPS, while Pepsi expects a 4% increase in revenue and at least an 8% growth in EPS.
Recent Performance & Valuation
Pepsi shares have declined by 1% in the last year, while Coca-Cola’s stock is down by 5%, both underperforming the S&P 500’s 22% increase and the Zacks Beverages-Soft Drinks Market’s 7% rise. Over the last three years, Pepsi’s 25% increase has roughly matched the benchmark, although this lags behind its Zack Subindustry’s 33% growth, while Coca-Cola’s 16% rise lags even further behind.
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Notably, Coca-Cola and Pepsi’s stock trade at around 21X forward earnings, which is on par with the S&P 500 and near their industry average of 19.6X, with both being historical leaders in the space.
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Exceptional Dividend Growth
Both Coca-Cola and Pepsi have consistently increased their dividends, with Coca-Cola having raised its dividend for 62 consecutive years and Pepsi for 52 years and counting. At present, Coca-Cola’s annual dividend yield of 3.08% slightly exceeds Pepsi’s 2.97%.
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Bottom Line
Despite facing lower volumes due to consumers being more budget-conscious, both Coca-Cola and Pepsi have been assigned a Zacks Rank #3 (Hold). Longer-term investors may find current levels to be rewarding, as both companies are still anticipating steady growth in FY24 while offering generous and secure dividends to shareholders.
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CocaCola Company (The) (KO) : Free Stock Analysis Report
PepsiCo, Inc. (PEP) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
