Comparing Coca-Cola and PepsiCo's Q2 Earnings: Who's the Better Beverage Stock?

Coca-Cola and PepsiCo have reported anemic growth in Q2 2025 earnings due to waning soda popularity and falling snack food demand. Both companies are diversified beverage holdings, but Coca-Cola's stock has outperformed PepsiCo's over the past year. Coca-Cola's Q2 net income was $3.8 billion, up from $2.4 billion in the year-ago quarter, while PepsiCo's $1.3 billion in Q2 net income was down from $3.1 billion 12 months ago. Coca-Cola's P/E ratio is 28, while PepsiCo's is 27, but PepsiCo's forward P/E ratio is significantly lower at 18.

Coca-Cola and PepsiCo have reported anemic growth in their second-quarter (Q2) 2025 earnings, primarily due to the waning popularity of soda beverages and falling demand for snack foods. Both companies, despite being diversified beverage holdings, have experienced a decline in sales and revenue growth.

Coca-Cola's stock has outperformed PepsiCo's over the past year, with Coca-Cola's Q2 net income rising to $3.8 billion from $2.4 billion in the year-ago quarter [1]. In contrast, PepsiCo's Q2 net income was $1.3 billion, down from $3.1 billion 12 months ago [1]. Coca-Cola's price-to-earnings (P/E) ratio of 28 is not significantly higher than PepsiCo's 27, but PepsiCo's forward P/E ratio of 18 is considerably lower than Coca-Cola's 23 [1].

Both companies have long been popular among dividend investors, maintaining a record of annual dividend hikes for more than half a century. However, PepsiCo's dividend yield of almost 3.8% far outpaces Coca-Cola's yield of around 2.9%, making PepsiCo a better fit for income investors [1].

Coca-Cola's stock price experienced a significant boost following the announcement of its Q2 earnings, rising by over 8% [2]. The company's impressive earnings performance, despite a slight decline in soda shipment volumes, was attributed to strategic management of expenses and pricing tactics, contributing to margin expansion. Coca-Cola's free cash flow potential remains a focal point, with expected capital spending of $300 million against a $406 million cash flow for the first half of the year, positioning it to achieve positive free cash flow of $500 million by the end of 2025 [2].

PepsiCo's snack business, which includes brands like Frito-Lay and Quaker, has been particularly impacted by the nutrition-inspired pivot, with customers increasingly seeking healthier snack options. Both companies have agreed to produce cane sugar versions of their flagship colas to cater to consumers turning away from high-fructose corn syrup. However, these initiatives have not yet translated into higher sales, and healthier ingredients often cost more, leading to higher input costs [1].

Investors should consider the valuation metrics signaling caution, as Coca-Cola's price-to-earnings ratio stands at 18.92, close to its one-year low [2]. The company's dividend yield is nearing a five-year high, offering an additional incentive for long-term investors seeking income. Coca-Cola's strong consumer defensive position, aided by its affiliation with The Coca-Cola Company, further supports its stock.

In conclusion, both Coca-Cola and PepsiCo face challenges due to the declining popularity of soda beverages and falling snack food demand. Coca-Cola's stock has outperformed PepsiCo's over the past year, but PepsiCo's lower forward P/E ratio and higher dividend yield make it a more attractive choice for income investors. Coca-Cola's strong financial foundation and strategic management of expenses position it for future growth, but investors should consider the valuation metrics before making a decision.

References:
[1] https://finance.yahoo.com/news/better-beverage-stock-coca-cola-070500480.html
[2] https://www.gurufocus.com/news/3005994/coke-stock-jumps-on-strong-q2-earnings-report