PepsiCo (PEP)

Coca-Cola (KO-N) or PepsiCo (PEP-N)? These are both struggling with the carbonated soft drinks side of things. There really hasn’t been much in terms of revenue growth for either.

It has been a fabulous stock. It seems to be doing everything right. It diversified away from sugary soda. The risk is thinking of it as a reliable beverage company. There is always the risk of a trip-up. She would prefer it to Coke (KO-N).

There is potential for this to make large acquisitions. They’ve been rumoured to be a potential suitor for Mondelez (MDLZ-Q), expanding out of the soft drink space and further into the sweet, snack food space. However, it has an elevated valuation trading at close to 21X earnings. Coca-Cola (KO-N) would be a more attractive valuation and gives you a higher dividend yield.

This is sort of unique in that they have a bit of a market niche. They did an expansion into the food group better than anybody else in their industry. This has a high multiple, but it has been higher before. They have the International growth continuing.

(Market Call Minute.) Like a lot of US multinationals, it is not cheap. Will probably grind its way a little higher. You can collect the dividend and you’ll be fine.

It becomes a favourite industry when we are uncertain about the future. Pepsi understands the pulse of changing taste. It even looks inexpensive.

Coca-Cola (KO-N) or PepsiCo (PEP-N)? The key difference is that this company has a more established non-beverage business. Over 50% of revenue comes from non-beverage items. They have been busy doing acquisitions on that front. Would prefer Dr. Pepper Snapple Group (DPS-N) which has about a 10^th of the market share of these 2, so there is an opportunity to steal market share.

Coca-Cola (KO-N) or PepsiCo (PEP-N) for a long-term investment? He doesn’t care for either. His choice would be Dr. Pepper Snapple (DPS-N). Carbonated beverage consumption is going down, so it is a race to try to diversify outside of that. Pepsi has done a better job of that. They have 22 brands and generates over $1 billion a year.

Sold his holdings because of valuations. Currently trading at about 21X earnings. The growth metrics started to sputter. The carbonated beverage market has been a tough one. Last quarter revenues were down year-over-year, which is not a good sign for a company. Earnings were up a little on cost cutting, and they are really getting their growth out of cost cutting. The Frito-Lay part of their business was toppy as well. People are moving towards healthier snacks. He would pass on this.

You have to like the product positioning and the growth they have shown over the last number of years. Valuation is high. It has come down a little bit and they are facing a bit of a headwind because of the stronger US$. If you are a long-term investor, these big US multinationals are better plays on global growth.

Likes it. People aren’t drinking as much as they used to, but PEP-N has a big consumer food and packaging business. He owns DPS-N instead. You can’t go too far wrong owning one of these beverage companies.

Pepsi (PEP-N) or Coke (KO-N)? Year-over-year carbonated beverage sales are down about 9%, which doesn’t bode well for either of name. To combat that they have diversified away by making acquisitions. He thinks this one has done a better job as 50% of their revenues come from noncarbonated drinks. His preference is Dr Pepper Snapple (DPS-N) which has Canada Dry, Crush, A & W Root Beer. This has very little market share outside of North America and their more specific target is into Mexico, the highest soda consumption capital globally. They are gaining traction there.

PepsiCo (PEP-N) or Coke (KO-N)? This one would be the best. The International side is smaller on soft drinks, but that is a growth area. Also, the biggest driver would be diversification through their Frito-Lay side. The whole trend out of both companies is moving away from soft drinks and more into the orange juice, etc.

Activist investors are trying to split them up. 11 of the top selling products in convenience stores are Pepsi products. They are the largest food and beverage distributor in Russia. $93.50 would be the stop.

Frito-Lay is definitely the money maker in this company. Beverages are in a bit of a decline. There has been a lot of talk that they should spin off the 2 companies. It is hard to predict if there is going to be a spin off. This is trading at about 2.5X the PEG ratio. Amongst some of the Consumer Staple names this is a pretty solid name. He prefers Mondelez (MDLZ-Q).