Let's review the newest facts first.
Pepsi's revenue for the second quarter narrowly beat expectations, coming in at $16.44 billion versus Wall Street's estimates of $16.42 billion. Earnings per share was $1.54, beating estimates of $1.50. The stock fell 0.57%. Analysts were cautiously optimistic.
While there's reason for bullishness on Pepsi, the same is actually true for Cocoa-Cola.
So, let's get to it... a soda square off, of sorts.
Pepsi Bull v. Coca-Cola Bull
Kevin Curran, reporter for TheStreet's premium sister site RealMoney notes the following on Pepsi:
- The launch of zero calorie Bubly and the acquisition of at-home soda-maker Soda Stream are still in their early stages of growth. financial results may not show themselves tomorrow, but they should show up in the long-run.
- Pepsi is also smartly capturing the millennial demographic by selling healthier snack and beverage products, as seen by the Bubly launch. Meanwhile, the company is selling smaller sized soda cans, which also allows for slightly higher pricing, which showed up in the sales results for the quarter. Pepsi could be a buy.
Pepsi, by the way, was RealMoney's stock of the day. Premium read here. Here's My Trade Idea for PepsiCo.
TheStreet's reporter Jacob Sonenshine (author of this very newsletter), notes the following on Coca-Cola:
- Pricing power is also in the equation for Coca-Cola, which is also selling smaller sized soda cans. A Morgan Stanley analyst sees this as a tailwind. The beverage industry isn't exactly shrinking.
- Emerging market trends are stable for Coca-Cola.
- Coke's revenue growth for 2019 is expected to be 9.4%, far higher than a normal growth rate for a consumer staple. That rate will moderate to 4.6% in 2020 and 4.5% in 2021, compared to Pepsi's expected revenue growth rates of between 2% and 4%.
- Coke's 2019 operating margin will likely be around 29%, compared with Pepsi's 16%. Coke's margin is expected to rise to 31% by 2021.
- Here's the kicker: the two are valued at the same earnings multiple, with both forward one-year price-to-earnings ratio's of 22. Coke could be a buy.
Sign up for the daily In Case You Missed It Newsletter Here.