Will These Coverage Initiations Help Coca-Cola (KO) and PepsiCo (PEP) Stock Today?

NEW YORK (TheStreet) -- BTIG initiated coverage on both Coca-Cola Co.  (KO) and PepsiCo (PEP) with "buy" ratings on each.

The firm set a $108 target price on PepsiCo, which represents a 29.5% upside, and a $48 target price on Coca-Cola, which represents a 24% upside.

PepsiCo was down 0.76% to $83.27, while Coca-Cola was up 0.27% to $38.73 at 11:32 a.m. on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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Separately, TheStreet Ratings team rates COCA-COLA CO as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate COCA-COLA CO (KO) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for COCA-COLA CO is rather high; currently it is at 65.74%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.48% trails the industry average.
  • Net operating cash flow has remained constant at $2,830.00 million with no significant change when compared to the same quarter last year. In addition, COCA-COLA CO has modestly surpassed the industry average cash flow growth rate of -5.32%.
  • COCA-COLA CO's earnings per share declined by 7.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, COCA-COLA CO reported lower earnings of $1.90 versus $1.96 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $1.90).
  • KO, with its decline in revenue, slightly underperformed the industry average of 4.0%. Since the same quarter one year prior, revenues slightly dropped by 3.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: KO Ratings Report

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Separately, TheStreet Ratings team rates PEPSICO INC as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation: 

"We rate PEPSICO INC (PEP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, notable return on equity, expanding profit margins and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:
  • PEPSICO INC has improved earnings per share by 5.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PEPSICO INC increased its bottom line by earning $4.32 versus $3.92 in the prior year. This year, the market expects an improvement in earnings ($4.52 versus $4.32).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 4.0%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Beverages industry and the overall market, PEPSICO INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for PEPSICO INC is rather high; currently it is at 56.50%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 8.65% trails the industry average.
  • You can view the full analysis from the report here: PEP Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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