Changing business conditions
Nonalcoholic beverage companies Coca-Cola (KO), PepsiCo (PEP), and Dr Pepper Snapple (DPS) are transforming their businesses to cater to the changing tastes of health-conscious consumers. As we discussed in the previous parts of this series, these companies are focusing on expanding their portfolios toward better beverage options.
Coke’s analyst recommendations
As of March 28, 64.0% (16 out of 25) analysts covering Coca-Cola’s stock have issued a “hold.” Eight analysts have issued a “buy” recommendation, and one analyst has issued a “sell.” In terms of sales growth rate, Coca-Cola underperformed PepsiCo and Dr Pepper Snapple (DPS) in fiscal 2016. The company delivered a sales growth rate of -5.5%, while PepsiCo and Dr Pepper Snapple reported a sales growth rate of -0.4% and 2.5%, respectively.
Coca-Cola has an extensive presence in over 200 countries and sells over 500 nonalcoholic beverage brands. The company’s portfolio includes 21 billion-dollar brands (brands generating over $1 billion in retail sales), 19 of which have reduced, low or no-calorie options. However, weak soda volumes and currency headwinds continue to be matters of concern for Coca-Cola.
Pepsi’s analyst recommendations
As of March 28, PepsiCo’s stock was rated as a “buy” by 68% (15 out of 22) analysts. Seven analysts have issued a “hold” rating for the company, while none of the analysts has issued a “sell” rating.
PepsiCo has a strong diversified portfolio of snack food and beverages. The company owns 22 billion-dollar brands, including Pepsi, Lay’s, Gatorade, and Tropicana. The company is focusing on innovation of healthier products with lower salt and sugar content and natural ingredients.
Dr Pepper Snapple’s analyst recommendations
About 75% (15 out of 20) analysts have rated Dr Pepper Snapple’s stock as a “hold.” Four analysts have rated the company as a “buy,” while one analyst has rated the stock as a “sell.” The third-largest soda maker is now looking for growth in the nonalcoholic beverage space, as we can see reflected in the company’s acquisition of Bai Brands.
12-month price target
As of March 28, the average price targets for Coca-Cola, PepsiCo and Dr Pepper Snapple were $44.11, $117.63, and $98.47, respectively. These price targets indicate an upside potential of 4.0%, 4.6%, and 1.3%, respectively.
We’ll compare valuations in the next and final part.