As 2025 gets underway, investors looking to refresh their portfolios with some attractively valued companies might be eyeing stocks that lagged the market in 2024. Beverage giants Coca-Cola (NYSE: KO) and PepsiCo (NASDAQ: PEP) have been under pressure over the past year, and both have fallen by around 14% from their 52-week highs.
Given the overlapping businesses, it probably doesn’t make sense for most investors to have both stocks in their portfolios. So which one is the better buy now?
PepsiCo’s 2024 has been a little worse than Coca-Cola’s. Not only was its dip from its peak slightly steeper, it’s actually down more than 10% year to date, while Coca-Cola is up by about 5%.
However, if you pull the lens further back, PepsiCo’s drop from its three-year high is around 22%, while Coca-Cola’s is around 14%. But Coke enjoyed a rally from late 2023 that lasted into 2024, while PepsiCo didn’t. All in, investors appear to have been a little more negative about PepsiCo overall.
That negativity gap extends to their relative valuations. PepsiCo’s price-to-sales ratio is nearly 18% below its five-year average. Coca-Cola’s P/S ratio is only about 7% lower than its five-year average. Similarly, PepsiCo’s price-to-earnings ratio is about 14% below its five-year average while Coca-Cola’s P/E is roughly 2% below its average.
And then there are their dividend yields. At their current share prices, PepsiCo yields 3.5% while Coca-Cola yields 3.1%. On an absolute level, PepsiCo’s yield is more attractive, but there’s more to the story. While Coca-Cola’s current yield is roughly middle of the road for the stock over recent years, PepsiCo’s is near its all-time high. All in all, PepsiCo looks like the better value if you have a value bias when you invest.
To be fair, these companies are not exactly interchangeable even though their beverage businesses have material overlap. That said, they are similar in many ways. For example, both have increased their dividends annually for over 50 years, earning them both spots among the Dividend Kings. Members of that elite group have proven they can weather the inevitable ups and downs in the business world and keep rewarding their shareholders along the way.
But consider the difference between them. Coca-Cola has grown its revenue at a slightly faster clip over the past few years, and its earnings have increased at a dramatically faster pace. PepsiCo’s full-year earnings growth rates have been stuck in the low single digits while Coca-Cola has been growing earnings at paces in the low double digits. In that light, it makes sense why investors appear to like Coca-Cola more than PepsiCo right now.
