By Evie Liu

Coca-Cola and PepsiCo, two of the world's largest consumer staples companies, have been on very different paths this year. Coke stock is up 16%, easily beating the 5.5% loss in the S&P 500, while Pepsi is down 12%.

That is counterintuitive because the companies are often considered together and viewed as rivals. But they run very different businesses, both in terms of the products they offer and the geographic markets they serve.

Coca-Cola reported its first-quarter earnings on Tuesday. Both earnings and revenue beat Wall Street estimates.

"Earnings season has given investors little to get excited about, the U.S. consumer softness persisted and growth in emerging markets slowed," said Kevin Grundy, senior research analyst at BNP Paribas Exane, on Tuesday, "In contrast, Coca-Cola continues to hit on all cylinders and stands out fundamentally within the group."

Coca-Cola shares are the analyst's top pick. Despite the company's best-in-class portfolio and market-share gains, the stock is trading at 25 times the earnings per share expected for the next 12 months, making it only 15% more expensive than its peers in the packaged-food and beverage basket. "We believe there is scope for Coca-Cola to trade at a wider premium," wrote the analyst.

The company's relative earnings stability, greater international exposure, and high dividend yield are attracting fund flows in the current environment, wrote Garrett Nelson, senior equity analyst at CFRA Research.

Coca-Cola is primarily a beverage company. The majority of its sales come from sodas, including low- and zero-calorie options like Diet Coke. It also sells other beverages like juice, milk, coffee, and tea.

While Pepsi is best known for its soft drinks, it also has a significant presence in snack food, with a diversified product portfolio that includes Lay's chips and Quaker oatmeal. That is both a strength for the company and a challenge as consumers' preferences change.

Pepsi has been under pressure as consumers snack less or shift to healthier alternatives, said Nik Modi, an analyst at RBC Capital Markets. Coca-Cola's soda sales, meanwhile, haven't been affected much by fear of recession and the rising usage of weight-management drugs.

The two companies also have very different international exposure. While the U.S. market only makes up 40% of Coca-Cola's revenue, it comprises about 60% at Pepsi. That means Pepsi is more at risk if domestic consumer spending weakens.

In the first quarter of 2025, Pepsi's organic revenue, which excludes the impact of foreign currency as well as acquisitions and divestitures, increased 1.2% from a year ago. The unit volume of beverages sold in North America declined 3%, while food sales volume slipped 1%.

Coca-Cola has grown its organic revenue by 6% during the same quarter, driven by strong growth in unit case volume in the Asian-Pacific and Europe, Middle East and Africa markets. Sales volume in the North American market fell 3%.

Write to Evie Liu at evie.liu@barrons.com

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April 29, 2025 17:05 ET (21:05 GMT)

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