Are The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP)’s Stocks Fizzling Buys?

Non-Alcoholic Beverage Growth Companies

Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF) has finalized its acquisition of a 51% stake of Coca-Cola Bottlers Philippines from Coca-Cola for $688.5 million. The acquisition would strengthen the company’s position in the global beverage industry. The company has the necessary skills and operational capabilities to capture the opportunities available in its Philippine operation.

According to Beverage Digest, Monster Beverage Corp (NASDAQ:MNST) will label its beverages’ ingredients as per the U.S. federal guidelines for food products that have caffeine content. According to Rodney Sacks, the CEO of Monster Beverage, the labels on the beverage cans would provide details about nutrition facts instead of supplement facts to qualify as food items under U.S. Food and Drug Administration policies. US regulators are investigating the drinks’ safety after they were linked to deaths and hospitalizations. The agency is investigating whether the beverages could cause any harm to people when consumed in large quantities by young people or by those who have heart problems.

Valuation Considerations

Most beverage firms are not trading at attractive price multiples:

Possibly the only exception is Dr Pepper Snapple Group Inc. (NYSE:DPS). All the other stocks on this list trade at high price-to-earnings ratios. All but Dr Pepper Snapple and PepsiCo trade at high price-to-sales ratios as well.

That being said, Dr Pepper Snapple is not trading at attractive valuations, just valuations that are near the averages of the broader market. There is no compelling reason to jump in.

Conclusion

Do not add non-alcoholic beverage stocks at current prices. As a group they are pricey compared to the stock market as a whole, and the only name with reasonable valuations, Dr Pepper Snapple, is not compelling based on growth or valuation.

The article Are These Beverage Stocks Fizzling Buys? originally appeared on Fool.com and is written by Bill Edson.

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