PepsiCo (PEP) vs. Coca-Cola (KO): What's the Stronger Near-Term Buy?

PepsiCo (PEP) is identified as a stronger near-term buy compared to Coca-Cola (KO), despite KO's recent stronger top and bottom-line growth of 5.1% and 6.5% respectively. PEP recently affirmed its FY25 guidance, leading to rising analyst EPS expectations and a Zacks Rank #2 (Buy), while KO, despite beating EPS estimates, saw marginal sales miss and no upward EPS revisions, maintaining a Zacks Rank #3 (Hold). PEP's more attractive valuation at 18.1X forward earnings, significantly below its five-year median, further supports its favorable outlook compared to KO's 22.4X multiple.

Analysis

PepsiCo (PEP) recently reported a double-beat, with sales growing 2.7% year-over-year and affirming its FY25 guidance, leading to a Zacks Rank #2 (Buy) and rising EPS expectations. In contrast, Coca-Cola (KO) posted mixed results, beating EPS by 5% but missing sales by a marginal 0.1%, resulting in a Zacks Rank #3 (Hold) and downward revisions for its next period. While KO demonstrated stronger top-line growth at 5.1% YoY and 6.5% adjusted EPS growth, its analyst outlook is less favorable.

PEP's current valuation stands at an 18.1X forward 12-month earnings multiple, significantly below its five-year median of 23.1X, indicating a more attractive entry point. KO, however, trades at a higher 22.4X multiple, closer to its 23.1X five-year median. This valuation disparity, combined with PEP's affirmed guidance and improving EPS outlook, suggests clearer near-term momentum for PepsiCo.

Both companies operate as defensive stocks, demonstrating consistent sales across various economic environments, with KO having widely outperformed PEP in 2025. KO's sales growth was notably aided by a 6% increase in price/mix, successfully passing costs to consumers. However, PEP's recent sales growth of 2.7% is its strongest since September 2023, signaling a potential turnaround from previous weakening growth rates.

Key Decisions for Investors

• Consider PepsiCo (PEP) for near-term outperformance given its more attractive valuation, positive analyst revisions, and affirmed FY25 guidance.
• Monitor Coca-Cola's (KO) future sales performance and analyst revisions, as its current valuation appears less compelling despite recent strong top-line growth.
• Evaluate both stocks within a defensive portfolio strategy, recognizing their ability to generate consistent sales, but prioritize PEP for potential momentum.