PepsiCo, Inc. (PEP), Dr Pepper Snapple Group Inc. (DPS): Here’s How This Beverage Giant Is Here For Good

Competitors

Coca-Cola’s biggest competitor, PepsiCo, Inc. (NYSE:PEP), beat earnings estimates for 1Q13 by reporting an EPS of $0.77. Analysts were expecting the company to earn around $0.71 per share. The major reason behind this was an increase in prices that lead to healthier margins. PepsiCo, Inc. (NYSE:PEP) is trading at a forward P/E (1yr) of 17.52 times, making it slightly cheaper than Coca-Cola Company (NYSE:KO). It has a dividend yield of 2.60% and a PEG of 2.05, which leads to a PEGY of 1.64. According to the sell side estimates, PepsiCo has a mean recommendation of 2.2 on the sell side, making it a great buy.

The third largest soft drink producer in the U.S, Dr Pepper Snapple (NYSE:DPS), didn’t do that well in 2012, where it wasn’t able to meet earnings estimates. In 2013 as well, the company doesn’t expect that much amid high costs associated with raw materials. Thus, the company expects to miss its earnings forecast this year. Dr Pepper Snapple Group Inc. (NYSE:DPS) is trading at a forward P/E (1yr) of 14.14 times, and has a PEG of 2.72. Incorporating a dividend yield of 3.20% in its PEG gives us a PEGY of 1.76. A mean recommendation of 2.5 on the sell side suggests that it isn’t as attractive as its peers, PepsiCo, Inc. (NYSE:PEP) and Coca-Cola.

Conclusion

During the past few years, Coca-Cola has shown an amazing level of consistency, which has lead to substantial value for shareholders. Just like the last quarter, 1Q13 results reflect the company’s strong hold on the beverage industry. In 2013 and beyond, the Asian markets would serve as the biggest catalyst for the beverage giant, where it’s expected to make further inroads. As far as products are concerned, juices and energy drinks are expected to be among the top growing items in the years ahead.

The bottom line is that Coca-Cola is still one of the safest and most profitable places to invest in such a volatile market. Thanks to its vast range of beverage products, Coca-Cola has out-maneuvered the recent economic downturn. Going forward as well, this giant is all set to keep on growing. In short, I recommend buying Coca-Cola for a yield of at least 12%.

The article This Beverage Giant Is Here For Good originally appeared on Fool.com.

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