Better Bull Market Buy: Coca-Cola vs. PepsiCo

There aren’t many places you can visit globally and not come across products from Coca cola (K.O 0.55%) or PepsiCo (PEP 0.18%). Both have a stronghold on soft drinks, and PepsiCo has built a solid portfolio of snack brands. It’s one of the most iconic rivalries in any industry.

Over the years, both Coca-Cola and PepsiCo have rewarded their investors. However, if you had to pick one in a bull market, which one would you trust more? These two Motley Fool contributors look at the bullish case for each.

Sometimes less is more for a business

Stephen Walters (Coca cola): The Coca-Cola Company has been around since 1892, and its iconic soda is one of the most successful products of all time. It’s not a stock that investors looking for big growth would gravitate towards, but it’s been undeniably successful over the decades, and its dividend is one of the most reliable you’ll find, with 62 consecutive years of increases .

The major difference between Coca-Cola and PepsiCo is that the former focuses exclusively on beverages and that’s why I prefer it. A leaner business allows it to run more efficiently.

It might surprise some to see how much more revenue PepsiCo brings in than Coca-Cola. In their most recent quarters, PepsiCo’s revenue was $10 billion higher. However, this does not directly translate into profitability, with their operating income (profits from their core operations) being neck and neck.

KO Revenue Data (Quarterly) by YCharts.

Focusing solely on beverages allows Coca-Cola to hone its craft and better understand consumer preferences because it doesn’t stretch its resources.

Despite the success of its flagship sodas, Coca-Cola has shown itself willing to adapt to changes in consumer preferences. It embraced ready-to-drink spirits (Simply Spiked, Topo-Chico hard seltzer, Fresca Mixed) and other options like Fairlife milk and plant-based AdeS, both relatively new categories.

Coca-Cola’s financials are just as solid, and it’s a company you can trust for the long term. Coca-Cola’s products sell regardless of the economy, and it has premium brands that give it pricing power to help during slower times. It’s a winning recipe in the long run.

Power in diversification

Jeremy Bowman (PepsiCo): Both Coca-Cola and PepsiCo have two of the best-performing stocks of all time, and their beverage duopoly has helped them both succeed.

They serve similar needs to those that pay dividends and are recession-proof, but Pepsi has an advantage because it is more diversified than Coke.

Of the two, only Pepsi has food exposure through brands like Frito-Lay and Quaker, as well as international food brands, and its beverage portfolio is less concentrated in soda than Coca-Cola.

Pepsi is also executing its recent Pep+ plan, which calls for an end-to-end transformation across the company with a focus on sustainability. And the company is delivering solid top and bottom line growth. PepsiCo targets basic earnings per share in constant currency of at least 8% this year and organic revenue growth of about 4%.

It performed well despite weak consumer spending due to high inflation in much of the world, and the company successfully weathered price increases as needed.

What is particularly attractive about a business like PepsiCo is that it can count on steady growth going forward because it sells consumable products, the global population continues to grow, and it has the marketing and distribution power to maintain its industry leadership, as he did it. for over a century.

Finally, it is one of the most reliable dividend stocks on the market, having increased its payout every year for 52 years, making it a Dividend King. It now has a dividend yield of 3.2%.

If you’re looking for a steady grower that pays a solid dividend and is recession-proof, it’s hard to find a better choice than PepsiCo. I definitely prefer it to Coke.