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Coca-Cola vs. Pepsi: Which is a better stock pick for 2024?

Coca-Cola vs. Pepsi: Which is a better stock pick for 2024?
Elmaz Sabovic

The soft drinks industry offers an enticing investment opportunity, notably with the dominance of two key players: Coca-Cola (NYSE: KO) and PepsiCo (NASDAQ: PEP). Both companies present compelling arguments for investment. 

Yet, Finbold analyzed their current trends, recent performance, and fundamental aspects to determine which makes a stronger case for investment.

An argument for PepsiCo

PEP stock demonstrated resilience in challenging market conditions, showcasing its prowess in maintaining sales growth and profit margins. 

Despite a tough selling environment, PepsiCo increased sales, primarily driven by rising prices. However, volume growth lagged, with a decline of 2% in the food division and 1% in beverages, causing PEP shares to decline 0.91% on a YTD basis.

Nonetheless, PepsiCo effectively improved its profit margin in Q1 through a combination of price increases and cost-cutting measures, resulting in a 2.7% jump in core earnings.

PepsiCo Q1 earnings performance. Source: AlphaStreet
PepsiCo Q1 earnings performance. Source: AlphaStreet

An argument for Coca-Cola

KO stock emerged as a growth leader, reporting a substantial 12% organic sales increase for 2023. The company’s sales growth was buoyed by its significant presence in on-the-go locations, such as restaurants and sporting events, which experienced heightened demand post-pandemic. 

Unlike PepsiCo, Coca-Cola demonstrated pricing and volume growth throughout 2023, underscoring its pricing power. With a profit margin of 30% of sales, double that of PepsiCo, Coca-Cola boasts a stronger financial position.

Furthermore, Coca-Cola offers robust cash returns to shareholders, having paid $8 billion in dividends and allocated nearly $2 billion to stock buybacks in the previous year. 

Looking ahead, Coca-Cola forecasts 6% and 7% organic sales growth for 2024, driven by sustained demand for its core beverages and newer additions like sparkling waters and energy drinks. 

Final verdict

In conclusion, Coca-Cola is poised for stronger growth in 2024, with an anticipated 6-7% increase in organic sales driven by robust demand for its core offerings and newer product lines such as sparkling waters and energy drinks. 

Conversely, Pepsi’s outlook is more conservative. It forecasts a modest 4% sales uptick due to subdued demand as consumer behaviors revert to pre-pandemic patterns. 

While both companies face challenges, Coca-Cola’s superior cash flow and earnings position it as the more favorable investment choice.

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