Piper Sandler is bullish on Coca-Cola (KO.US) and PepsiCo (PEP.US), and has a "neutral" rating on Keurig Dr Pepper (KDP.US).

Piper Sandler made new rating adjustments for several major beverage companies on Tuesday, upgrading Coca-Cola (KO.US) and PepsiCo (PEP.US) while maintaining a Neutral rating for Keurig Dr Pepper (KDP.US). The ratings reflect Piper Sandler's different expectations for the companies' future market performance. For Coca-Cola, the firm's analyst Michael Lavery and his team highlighted its strong brand influence, excellent execution, and significant exposure in emerging markets. They believe these factors will drive Coca-Cola to achieve sustainable growth. Moreover, Coca-Cola's portfolio benefits from the high growth rate of global beverage categories and a steady increase in market share. Looking ahead, the Atlanta-based company still has significant potential in emerging markets, especially where it has established a strong brand foundation. Piper Sandler showed optimism in its rating for PepsiCo. Although PepsiCo faces some risks in the first half of 2025 and its 2025 performance guidance is uncertain, the analysts believe these factors are already reflected in the stock price. They expect PepsiCo's Frito-Lay business to gradually normalize over time. Additionally, Piper Sandler applies a price-to-earnings ratio of approximately 18.5 times to PepsiCo's 2026 earnings per share, lower than its five-year historical average of 22.5 times. The company also plans to offset some incremental discounts through productivity improvements. Meanwhile, Keurig Dr Pepper was rated Neutral, lower than other beverage peers. Lavery warned that the company faces challenges in the current coffee market due to a weak revenue growth momentum, a recent surge in coffee input costs, and uncertain incremental pricing opportunities. Notably, coffee bean prices have reached their highest level in 47 years, while Keurig Dr Pepper has announced only modest single-digit pricing adjustments, putting pressure on margins.