How fizzy will Coca-Cola (KO) and PepsiCo (PEP) results be?
By Jenny McCall
15:36, 8 February 2022
This Thursday, the world’s two leading soft-drinks makers go head to head as both PepsiCo (PEP) and Coca-Cola (KO) release their fourth-quarter earnings results.
The two beverage makers have been engaged in a struggle for domination of the soft-drinks market for decades, with the battle between their popular cola-based varieties, Coca-Cola and Pepsi Cola, commonly referred to as ‘Cola Wars’. Yet despite Coca-Cola outselling Pepsi Cola in the US, PepsiCo is the largest food and beverage company by net revenue within the North American market.
At the start of this year, Coca-Cola stock rose by 20% from $50.52 in early January 2021 to reach $60.68 as of 6 January 2022.
Rival PepsiCo also demonstrated good results in its third-quarter earnings report, which showed that the company’s net revenue grew by over 11.6%, with an 11% increase in beverage volume. It expects to deliver 8% organic revenue growth for 2021, up from the 6% expected.
But can we expect this trend of good fortune to continue for both brands, or will the present fizz go flat?
At the end of last year, most stocks were contending with rising Covid-19 cases and additional variants such as Omicron, which may play havoc with Thursday’s results for both famous brands.
According to Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
Here we take a look at what other analysts think we should expect to see from these brands’ fourth-quarter results on Thursday.
Coca-Cola (KO)
Coca-Cola stock suffered a huge setback in 2020 in the height of the pandemic, with previous results showing the stock declined by over 30% between 10 January to 16 March 2020. However, the stock quickly rebounded, and its stock price is now higher than it was pre-pandemic.
Yet will the king of soft drinks have the winning formula to beat analysts’ expectations and deliver stellar results on Thursday?
According to some experts, KO stock will deliver good financial results this week, which are likely to provide investors with further fizz.
Kalogeropoulos’s sentiment is shared by other analysts:
But the outlook for Coca-Cola has not been 100% positive. With rising inflation and macro pressures around the world, can Coca-Cola keep investors happy?
“The other thing to keep in mind is cost inflation. This is a global headwind and there isn’t a huge amount Coke can do about it. But we wonder how effectively higher costs have been offset, and what impact this will have on profits,” said Lund-Yates.
“The groups also ramped up their marketing spending, so all in all, the operating bill is likely to be a fat one,” she added.
What is your sentiment on KO?
PepsiCo (PEP)
Meanwhile, PepsiCo, famed for its catchphrase “for the love of it”, will certainly be hoping that its fourth-quarter results will be loved by investors on Thursday.
The popular American multinational food, snack and beverage brand, which also owns the Quaker Oats Company, Frito-Lay, Doritos, Gatorade, 7 UP, Tropicana and Cheetos brands among other popular snack food and beverage brands, will be looking to add some fizz to the results on Thursday.
According to some analysts, PepsiCo’s outlook is not 100% sparkling.
But not everyone agrees.
“Pepsi’s annual sales are around twice that of its famous rival [Coca-Cola]. Keeping hold of that accolade has a lot to do with how well it’s navigated Covid disruption, including offsetting costs and supply headwinds. We’ll be looking for a continuation of this trend next week,” Lund-Yates said.
An ability to keep profits nudging forward underpins Pepsi’s ability to pay a dividend. We have reason to be optimistic about its ability to continue its run of 49 years of consecutive dividend growth, but this is not guaranteed.
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