PepsiCo (PEP 0.40%) reported better-than-expected earnings results for its second quarter of 2022. The excellent metrics led PepsiCo's management to raise its revenue target for the rest of the year by 200 basis points. The driving force behind PepsiCo's results was a demonstration of its pricing power, as consumers kept purchasing its products despite price hikes.
Those trends got investors excited about the potential for Coca-Cola (KO +0.19%) to deliver similarly impressive numbers when it reports earnings on July 26. Here's a closer look at PepsiCo's results, what it could mean for Coca-Cola, and if that makes Coca-Cola's stock a buy right now.
NASDAQ: PEP
Key Data Points
PepsiCo raises its annual sales expectations
Impressively, PepsiCo reported a revenue increase of 13% in its most recent quarter, which ended on June 11. Pricing increases drove the vast majority of that rise. PepsiCo raised prices on its products by more than double digits in the quarter.
Despite the higher prices, consumers did not pull back on purchases of PepsiCo's snacks and beverages. Observing the positive trends, PepsiCo's management raised its annual revenue growth target to 10%, up from the previously stated 8%.
NYSE: KO
Key Data Points
What that could mean for Coca-Cola investors
Coca-Cola is recovering strongly from the initial setback of the COVID-19 outbreak. It has more exposure to away-from-home channels like restaurants, theme parks, and movie theaters than rival PepsiCo. Coca-Cola is now capturing a tailwind from the economic reopening as folks visit away-from-home venues more frequently. In its most recent quarter, which ended on April 1, revenue increased by 16% from the same quarter in the prior year.
KO Revenue (Quarterly) data by YCharts
Additionally, Coca-Cola shareholders will have higher hopes going into its second-quarter results on July 26 from what they saw from PepsiCo. Since the competitor sells similar beverages in similar markets worldwide, its better-than-expected revenue figures are a good sign for Coca-Cola. That and the continued momentum from the economic reopening could propel Coca-Cola's revenue and profits.
Coca-Cola's management forecasted revenue growth between 7% and 8% for fiscal year 2022. It will not be surprising, and might be disappointing (considering PepsiCo's increase), if management does not raise that target when it reveals earnings figures on July 26.
Muting investors' enthusiasm for Coca-Cola stock
KO Price to Free Cash Flow data by YCharts
Despite its excellent prospects in the near term, investors should not yet purchase Coca-Cola stock. Trading at a price-to-earnings ratio of 26 and a price-to-free cash flow also of 26, Coca-Cola's stock is not cheap.
As an investor, you can wait for the company's second-quarter results to come out on July 26 before deciding on whether to accumulate shares. That way, you will have the most recent data to consider.
