Is Coca-Cola the Best Beverage Buy?

With consumers becoming more health-conscious, the sparkling beverages of The Coca-Cola Company (NYSE: KO  ) and PepsiCo  (NYSE: PEP  )  aren't showing much growth. Instead, their still beverages are driving their sales. Let's analyze Coca-Cola in detail before we examine PepsiCo and Monster Beverage (NASDAQ: MNST  ) .

First-quarter results
Coca-Cola recently announced quarterly results that were in-line with analysts' expectations. Excluding special items, earnings per share for the company stood at $0.44 a share while net revenue slipped 4% to $10.58 billion. Analysts were looking for EPS of $0.44 and revenue of $10.55 billion. The company attributed its decrease in sales during the quarter to unfavorable currency exchange rates and the costs it incurred to make structural changes to its operations.

Coca-Cola's global unit volume rose 2%, largely driven by an 8% increase in still beverage volume. However, sparkling soft-drink volume fell 1% for the quarter. Juice drinks grew 3% on account of strong sales for Minute Maid and its ready-to-drink portfolio, especially tea. Minute Maid's unit sales grew 1.5% in the U.S. as this brand displaced PepsiCo's Tropicana as the highest-selling juice brand in the country. The company also enjoyed healthy margins due to low tea prices.

What is Coca-Cola up to?
To keep growing its beverages business, Coca-Cola is continuously partnering with renowned brands and companies throughout the world. 

Coca-Cola and Arca Continental have acquired the majority stock of Tonicorp, the leading dairy group in Ecuador. Arca Continental has been in Ecuador for the last four years as the sole bottler of Coca-Cola in the country. The partnership will enable the companies to offer a variety of products that meet consumers' needs in the country. The acquisition also shows Coca-Cola's focus on the South American region, where it will continue to invest in the days to come.

Coca-Cola has also signed a 10-year agreement with Keurig Green Mountain to collaborate on the development of Coca-Cola's global brand portfolio for use in Green Mountain's upcoming Keurig Cold. Coca-Cola has acquired $16.68 million shares of Green Mountain which are worth $1.25 billion; this means that Coca-Cola now has a 10% stake in the company. 

Fiesta Restaurant Group and Coca-Cola have recently made an agreement under which all of the group's 105 U.S. Pollo Tropical locations will now serve Coca-Cola's products. The deal also extends to Fiesta's 165 Taco Cabana locations. The two companies will also be involved in the mutual development of their various marketing and promotional programs.

Moreover, Coca-Cola has entered into a multi-year deal with Domino's Pizza to continue supplying beverages to its restaurants.

When we compare Coca-Cola to PepsiCo, we see that PepsiCo has far greater earnings growth (TTM vs TTM one year ago) than Coca-Cola. Moreover, its price-to-earnings ratio is also less than that of Coca-Cola, which implies that it is relatively cheaper than Coca-Cola. PepsiCo's lower price-to-sales ratio also tells the same story.

Industry peers
During its most recent quarter, PepsiCo delivered solid 13% growth in its profits and registered better-than-anticipated earnings results. Earnings climbed to $0.79 per share from $0.69 a share, coming in well ahead of analysts' estimates of $0.75 per share. Revenue for the quarter also increased to $12.62 billion. Although Pepsi's beverage business remained flat, its snack food division reported 2% volume growth. In an effort to further strengthen its product line and grow its presence in the lucrative Mexican market, the company announced that it will invest $5 billion in the region. The planned investment will help Pepsi tap the growing middle class of Mexico and generate significant returns in the future.

The manufacturer of energy drinks, Monster Beverage, announced steady returns in its latest quarter. Net income per diluted share came in at $0.44, up from $0.39 a share in the comparable quarter in 2012. Net sales for the company also grew 14.7% to $540.8 million. Recently, the company struck a settlement worth $16.35 million related to its channel-stuffing case. The case filed against the company accused it of defrauding its shareholders by inflating the benefits of its distribution agreement with Anheuser-Busch.

Final thoughts
Coca-Cola posted an average quarterly result; earnings met expectations but revenue missed estimates. Coca-Cola's recent agreements with Keurig Green Mountain, Domino's, Fiesta, and Arca Continental will ensure that its brands continue to grow. However, as consumers are becoming more health-conscious, the bulk of the company's growth in the future will be fueled by still beverages like RTD tea, juices, and energy drinks rather than soda drinks.

Fortunately, the company has some of the most renowned still beverages in its portfolio such as Minute Maid, Gold Peak, Honest Tea, and Dasani, which will continue to spur its growth. Considering all of this, Coca-Cola appears to be a judicious investment choice at this point in time. 

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