Coca-Cola Stock Has Momentum, PepsiCo May Be the Better Buy

Key Points

• Coca-Cola stock is outperforming the sector in 2025 with strong earnings and a solid dividend, but its high valuation may limit future upside.
• PepsiCo stock is underperforming due to inflation and GLP-1 drug impacts, yet trades at a discount and may be oversold with long-term rebound potential.
• Both companies remain reliable dividend payers and core holdings in consumer staples, offering different appeal based on risk tolerance and investment strategy.

The stocks of The Coca-Cola Company NYSE: KO and PepsiCo. Inc. NASDAQ: PEP are a source of debate between value and growth investors. In 2025, KO stock clearly holds the upper hand. The stock is up 14.5%, which is above the sector average. PEP stock is down 13.5% and trading near 52-week lows.

However, while momentum is on the side of Coke, Pepsi may be a more refreshing choice for investors. 

When evaluating these two category leaders, it’s important not to develop tunnel vision. The company’s flagship soft drinks are under fire from the Secretary of Health & Human Services (HHS) and GLP-1 drugs.

Both companies have been diversifying their respective businesses for years, which is why they continue to be a staple in many investors’ portfolios. 

It’s also why many of the leading consumer staples ETFs hold both stocks. The companies have defensive qualities and prioritize shareholder value. 

Coca-Cola Is Outperforming the Sector, But Is Growing Pricey

Just when consumer staples stocks started to break out of a two-year slump, a weakening economy pushed the sector lower. The iShares U.S. Consumer Staples ETF NYSEARCA: IYK, a fund that provides broad exposure to the sector, is up about 8% in 2025, but it’s found resistance near its 52-week high.

That makes KO stock's performance that much more impressive. When you include its dividend yield of 2.86% in the stock price gain, it’s more than doubled the sector average. This is an earnings story.

The company’s revenue is down slightly year-over-year (YOY), but its ability to keep earnings steady is a testament to its pricing power. 

However, in 2024, the word on every investor’s lips is valuation.

That’s where KO stock starts to look a little pricey. It’s trading at around 28x earnings and 24x forward earnings. Both are above the average for soft drink stocks of 20.4x, as compiled by Yardeni Research.

Perhaps more significantly, both are above the stock’s own historical average.

The Coca-Cola analyst forecasts on MarketBeat have a consensus price target of $75.08 on KO stock as of May 28. Several analysts raised their price targets after Coke reported earnings in April. 

The King May Be Ready to Ascend Once More

One common trait of both Pepsi and Coca-Cola is their status as Dividend Kings. That means the companies have increased their dividends for at least 50 consecutive years.

That typically means investors can count on fortress balance sheets to support that dividend. 

That’s not the case with Pepsi in 2025. In 2024, Pepsi paid shareholders $5.42 per share in dividends. However, it generated $5.28 per share in free cash flow. That means Pepsi had to dip into its ample cash reserves to cover its dividend. 

The company’s financial performance is reflected in the stock price. PepsiCo stock is down 14% in 2025 and more than 24% in the last 12 months. The company is distinctly different from Coca-Cola because of its snack food division.

This has allowed Pepsi to offer investors a more diversified portfolio that’s been reflected in PEP stock’s total return of more than 224% in the last 15 years.

The company is being acutely impacted by GLP-1 drugs that lower patient cravings. However, the bigger impact now is inflation, which has been higher relative to food items.

Even with premium shelf space and pricing power, consumers appear to be making more savvy choices. 

However, slower growth is still growth, and with the stock trading near five-year lows, it’s starting to look oversold. Analysts' forecasts and the stock’s relative strength indicator support this. Plus, at 18x earnings, it’s trading at a discount to itself and the sector.