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PepsiCo (NASDAQ:PEP) has been relatively stagnant recently, with its stock trading mostly flat over the last year. Over the past five years, it has returned about 33%, whereas the S&P 500 has nearly doubled in that time. This performance raises questions about whether it might be worth exploring other options.
At present, two other major consumer staples companies, Philip Morris International (NYSE:PM) and Keurig Dr Pepper (NASDAQ:KDP), appear to offer more compelling prospects. The reasoning lies in the valuation and growth metrics. Over the last 12 months, both Philip Morris and Keurig Dr Pepper have shown higher revenue growth and improved operating margins compared to PepsiCo. Additionally, these companies are currently priced more favorably than PepsiCo.
Philip Morris and Keurig Dr Pepper not only offer stronger financial performance but also come at a lower cost. For example, you pay $13.76 per dollar of earnings-before-interest-and-taxes (EBIT) for Philip Morris stock versus $17.85 for PepsiCo. Moreover, Philip Morris exhibits a higher annual growth rate (9.9% compared to 2.1%), better quarterly growth (5.6% versus 0.8%), and a more significant increase in margins (3.1% compared to 1.2%). This data indicates that Philip Morris and Keurig Dr Pepper deliver higher revenue and operating profit growth at a more reasonable price than PepsiCo.
However, PepsiCo could potentially exceed expectations, particularly with its recent price increases and stronger-than-anticipated earnings. Despite facing lower volumes, the company has managed to boost its margins through these price adjustments. PepsiCo has also explored smaller, high-margin packaging options, which have been beneficial. Furthermore, the company's stable capital return program, including plans to return about $8.2 billion this year—$7.2 billion of which is in dividends—could provide support for its stock.
