The Edge: Battle of the Beverage Behemoths Coke vs. Pepsi

The Trading Edge with Derek Hoffman2010 is in the red, more people watched the Super Bowl than ever before (i.e. unemployment still must be high), the Saints finished with a story book ending to the post-Katrina rollercoaster that New Orleans faced, and the DOW recently cracked below 10,000 for the 1st time in 3 months.

Today, I’m going to dig a little deeper into the Battle of the Beverage Behemoths: Coke (KO) vs. Pepsi (PEP):

Coca-Cola (KO): Still the Real Thing

Earnings: $.66 cents per share compared to $.43 cents per share in the same period a year ago. The consensus analyst estimate was $.66 per share, in-line with expectations.

Revenue increased 5.6% to $7.5 billion from $7.1 billion. Analysts expected revenue of $7.2 billion, an upside surprise for KO.

On the conference call, CEO Muhtar Kent said, “”Compared to this time last year, there’s a lot more clarity in terms of what the consumer is seeing. Not all good, but there’s a lot more clarity.”

Comment: Coca-Cola said it gained market share globally in the non-alcoholic ready-to-drink beverage category for the 10th straight quarter. KO sold 5% more beverages worldwide in its 4th quarter, with stronger sales in China and India. North America saw a 1% decline in case volume, an evident sign the U.S. consumer is still less willing to spend than once before. Coca-Cola is focused on its international growth, as international sales now consist of 75% of total company revenue. KO seems more focused on ‘opening happiness’ in other parts of the world, since North American happiness has experienced a plateau over the past couple years.

PepsiCo (PEP): Super Bowl Dorito Domination

Earnings: $.90 cents per share compared to $.46 cents per share in the same period a year ago. The consensus analyst estimate was $.91 per share, a minor expectation miss for PEP.

Net revenue increased 4.5% to $13.3 billion from $12.7 billion. PepsiCo positively nudged analyst expectations of $13.26 billion.

Comment: The true winner of cheers and laughter during the Super Bowl commercial showdown clearly goes to ‘Keep Yo Hands off my Momma and my Doritos.’ The post-game commercial buzz is still lingering the Doritos commercial, and the sign of a true win for PEP’s Super Bowl investment. Today’s quarterly earnings release proved PepsiCo’s snacks business to be a major catalyst for growth. Like Coca-Cola, the reiterated theme from PEP management was a focus on accelerating growth in developing, overseas markets since PepsiCo’s North American beverage revenue also declined. On a bright note, PepsiCo forecasted an 11-13% growth rate for core constant currency Earnings per Share for fiscal 2010. As PepsiCo hopes to complete the $7.8 billion acquisition of its two largest bottlers by the end of the month, patience will pay you with more clarity into PEP’s future numbers.

The markets are displaying heavy volume down days, an ominous sign that the recent ‘Great Recession’ bear market rally is no longer dancing, but wobbling with shaky legs. Capital preservation is never a losing a proposition during turbulent times like these.

Coke (KO) or Pepsi (PEP)? Who do you think won the battle of Super Bowl Ads?

Disclosure: No positions in the stocks mentioned.

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