Two giants of the beverage industry are amongst the earnings calls today. Coca-Cola (NYSE: KO) and Pepsi (NASDAQ: PEP) both beat estimates on revenue and earnings but warned of significant headwinds moving forward.
These issues lead to relatively weak outlooks for the coming year. Despite these echoing sentiments, however, the companies’ shares have moved in opposite directions. Coca-Cola opened up over 1.5%, while Pepsi slid by a similar amount. So, why the divergence?
A reliable choice
In a word, reliability. Coca-Cola is a staple of many long-term investment portfolios. It’s one of the most reliable dividend stocks on the market and has even been a cornerstone of Warren Buffett’s portfolio since 1988. And if it’s good enough for the ‘Oracle of Omaha,’ it’s probably good enough for the rest of us. When the two biggest businesses in one sector post similar results and near-identical outlooks, it’s very easy to go with the proven commodity.
Coca-Cola has also made some savvy purchases, with its acquisition of BodyArmor allowing it to vastly increase its hold on the lucrative sports drink market. As investors continue to rotate away from growth stocks and into safer options, Coca-Cola remains poised to reap the benefits of its globally acclaimed brand over its bitter rival.
Both Coke and Pepsi offer a solid route into a very secure industry. Neither look likely to fail any time soon, and both share a significant proportion of the global market share. However, Coke’s brand value means it will continue to have an edge on Pepsi, and that’s precisely why it’s one of my go-to defensive stocks.
Financial Writer at MyWallSt
Pádraig’s favorite stock is Nike. Growing up as a sports fanatic, seeing Nike collaborate with athletes like Jordan, Lebron, and Ronaldo inspired him and cemented the brand in his mind. Now, despite having failed miserably in his attempts to earn a fabled Nike sponsorship, he still believes in the innovation and creativity behind Nike and is convinced they will only grow stronger as the world's leading sports brand.