This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Coke and Pepsi May Be Losing Their Fizz

Stocks in this article: KO PEP SBUX

The analyst consensus estimate for sales revenue for the fourth quarter of 2012 is $11.54 billion, an increase of 4.6% over the year-ago same quarter. Earnings (EPS) are estimated to have risen 12.8% to 44 cents per share. KO will be under tense scrutiny to come close to or exceed these numbers.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

Pepsico is also feeling the pinch from declining soda sales, but not as much as Coke, which derives about 60% of revenue in the U.S. from carbonated soft drinks. PEP has a wider array of other products including such food brand names as Lays and Ruffles potato chips, Doritos and Tostitos tortilla chips, Cheetos cheese flavored snacks, branded dips, Fritos corn chips, SunChips multigrain snacks, and Santitas tortilla chips in North America.

In addition, PEP makes money selling Quaker oatmeal, Aunt Jemima mixes and syrups, Quaker Chewy granola bars, and Quaker grits, Captain Crunch cereal, Life cereal, Rice-A-Roni side dishes, Quaker rice cakes, Pasta Roni, and Near East side dishes throughout North America.

Let's look at PEP's chart.

PEP Chart PEP data by YCharts

Even though PEP's revenue per share plunged through the end of October 2012, the share price movement suggests that when it reports fourth-quarter revenus and EPS on Feb. 14, analysts and shareholders will like what they hear.

The analyst consensus estimate for PEP's sales revenue for $19.65 billion, less than 1% improvement over the same quarter in 2011. EPS average estimate calls for $1.05, which would be an 8.7% decline from the year-ago quarter.

If that news is already baked into PEP's share price, there's probably an opportunity here for an upside surprise since expectations are so measly.

PEP pays a current annual dividend of $2.15, which represents a payout ratio of 56%. With over $6 billion in levered free cash flow that dividend looks sustainable. At a $71.84 share price this would mean a yield-to-price of a delectable 3%.

PEP shares sell at around 16 times forward earnings compared to KO's forward PE of 17. KO's current dividend payout ratio is 52% with $6.4 billion in levered free cash flow. Its current yield-to-price is a slightly less desirable dividend yield of 2.75%.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs