Today on Mad Money beloved host Jim Cramer, who was a long-time Coca-Cola fanatic, shocked the world (or at least me) as he jumped ship from The Coca-Cola Company ( KO ) to PepsiCo, Inc. ( PEP ) as his preferred industry investment. As an ever-faithful Coke consumer I thought I misheard at first; but after giving my full and undivided attention to the television, I was completely dumbfounded to discover that what I thought I had heard was true. Try to imagine a life-long Yankees fan suddenly rooting for the Red Sox; it just doesn't happen. So why jump ship? Well Mr. Cramer supported his position by claiming that KO is overpriced and that it is losing market share as PepsiCo continues to expand. He cited that, although PepsiCo's packaged food division can have thin margins due to the price volatility of grain, costs are coming down. In addition, PepsiCo's Mountain Dew soda is rapidly gaining popularity at home and abroad. Mr. Cramer believes that the tables are turning for PepsiCo, but let's get into some numbers to compare the two.
The Coca-Cola Company
Market Cap: $168.58 billion
Current Share Price: $74.66
52 Week Range: $63.34-$77.82
Price/Book Value: 5.17
Operating Margin: 23.43%
Profit Margin: 18.50%
Return On Equity: 26.70%
Qtrly Revenue Growth (yoy): 5.90%
Qtrly Earnings Growth (yoy): 7.90%
Total Cash: $15.78 billion
Total Debt: $31.12 billion
Current Ratio: 1.13
Dividend (%): $2.04 (2.7%)
(Find more stats here.)
Market Cap: $106.43 billion
Current Share Price: $68.05
52 Week Range: $58.50-$70.75
Price/Book Value: 4.70
Operating Margin: 15.40%
Profit Margin: 9.59%
Return On Equity: 27.67%
Qtrly Revenue Growth (yoy): 4.10%
Qtrly Earnings Growth (yoy): (1.40%)
Total Cash: $3.81 billion
Total Debt: $27.71 billion
Dividend (%): $2.15 (3.1%)
(Find more stats here.)
So now that we have some numbers to work with, we can compare the two companies in some important aspects:
|Q. Rev. Growth||x||5.90%||4.10%|
|Q. Earn. Growth||x||7.90%||(1.40%)|
|Total Cash||x||$15.78 B||$3.81 B|
|Dividend||$2.04 (2.7%)||$2.15 (3.1%)||x|
Of the 11 compared statistics, Coke wins by a fat margin of 7 to 4. Speaking of margins, KO has considerably better margins than PEP which, for me, is a major factor in determining the best company. Also, Coca-Cola Co.'s balance sheet carries $12 billion more cash than PepsiCo while only having $3.41 billion more debt. Sure PepsiCo has a higher yield because it is not priced as highly as Coca-Cola Co., but there could be good reason for that.
So with some considerable differences in the numbers, it seems that KO is the better choice here. But that's only by the numbers. Jim Cramer may have a valid reason for the sudden switch; but it doesn't seem like these metrics supports that. Keep in mind that Wall Street hot shots aren't always right.
After nearly half of a century-long rivalry, the vicious battle continues as these two beverage power houses duke it out. From Main Street to Wall Street people have their preferences; but only time will tell who comes out on top.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.