Investment Analysis
Investment Analysis
In 1965, Pepsi Co was created through a merger of two companies Pepsi Cola and Frito Lay by Donald M. Kendall, President and Chief Executive Officer of Pepsi-Cola and Herman W. Lay, Chairman and Chief Executive Officer of Frito-Lay. Pepsi was originally founded in 1898 by Caleb Bradham, a New Bern, North Carolina, druggist, who first formulated Pepsi-Cola. Today, Pepsi is part of a portfolio of drinks that includes carbonated and non-carbonated drinks such as soft drinks, juices and juice drinks, ready-to-drink teas and coffee drinks, isotonic sports drinks, bottled water and enhanced waters. PepsiCo operates in four major fields. These fields include: PepsiCo Americas Beverages, PepsiCo Americas Foods, based in America PepsiCo Europe, and PepsiCo Asia, Middle East and Africa. The Pepsi-Cola Company is the world’s second largest beverage company. Pepsi-Cola beverages are available in about 170 countries.
The product that has given the world its best-known taste was born in Atlanta, Georgia, on May 8, 1886. Dr. John Stith Pemberton, a local pharmacist, produced the syrup for Coca-Cola, and carried a jug of the new product down the street to Jacobs' Pharmacy, where it was sampled, pronounced "excellent" and placed on sale for five cents a glass as a soda fountain drink. Carbonated water was teamed with the new syrup to produce a drink that was at once "Delicious and Refreshing," a theme that continues to echo today wherever Coca-Cola is enjoyed. The company markets its beverages under various brand names, including Coca-Cola, Diet Coke, Fanta, and Sprite. The Coca-Cola Company also produces and markets noncarbonated beverages, including waters and flavored waters, juice and juice drinks, energy and sports drinks, teas, and coffees. Today, the company is the world's leading manufacturer in the beverage industry, operating globally in more than 200 countries with its head office located in Atlanta. It produces more than 300 beverage brands and over 1.06 billion drinks are consumed per day around the world.
In April 2012, Coca Cola had stronger than expected earnings which caused investors to think twice about investing in Pespi Co. who is the producer of Pepsi, Mountain Dew, Gatorade, Doritos, Ruffles, Quaker, Aunt Jemina and other well-known global brands. The shares of Pepsi remained weak over the past year, based on a weak earnings report during the fourth quarter of 2011. Since, the company has announced a plan to layoff 8,700 employees in a bid to reduce $1.5 billion in costs by 2014 (Investorguide.com, 2012). Pepsi’s stock was ignored following the market wide rally that forced many major stocks which include Coca Cola into a 52 week high and beyond. Now, as instability returns to the market, many investors are looking to sell in May and many have stated they are interested in Pepsi again which may be considered a slow moving, defensive income stock that can stay afloat during uncertain times.
In June 2011, there was a lawsuit against Coca Cola due to false advertising Vitamin Water as a healthy drink went to mediation. The lawsuit is based on the fact that the name of the drink, Vitamin Water, leads consumers to believe that the drink contains only water and vitamins (Stocksinthfuture.org, n.d). Vitamin Water contains sugar, however, Coca Cola stated that the nutrition label mentions all other ingredients. With the lawsuit against Coca Cola in regards to false advertisement can have a negative impact on Coca Cola stock prices.
Based on the above chart, Pepsi has traded a lower T/E than Coca Cola for 5 years straight; however, Coca Cola traded a lower T/E 2011. This is due to a large debt refinancing that Coca Cola made in 2011 due to an acquisition which resulted in a large non cash EPS gain.
Based on above Net Income chart, Coca Cola has grown their total income faster than Pepsi.
Both companies has been able to grow their revenue over the last 5 years; however, Coca