Does PepsiCo's 2024 Stock Slide Make It a Better Buy Than Coca-Cola in 2025?

As 2025 gets underway, investors looking to refresh their portfolios with some attractively valued companies might be eyeing stocks that lagged the market in 2024. Beverage giants Coca-Cola (NYSE: KO) and PepsiCo (NASDAQ: PEP) have been under pressure over the past year, and both have fallen by around 14% from their 52-week highs.

Given the overlapping businesses, it probably doesn't make sense for most investors to have both stocks in their portfolios. So which one is the better buy now?

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How far have PepsiCo and Coca-Cola really fallen?

PepsiCo's 2024 has been a little worse than Coca-Cola's. Not only was its dip from its peak slightly steeper, it's actually down more than 10% year to date, while Coca-Cola is up by about 5%.

However, if you pull the lens further back, PepsiCo's drop from its three-year high is around 22%, while Coca-Cola's is around 14%. But Coke enjoyed a rally from late 2023 that lasted into 2024, while PepsiCo didn't. All in, investors appear to have been a little more negative about PepsiCo overall.

PEP data by YCharts.

That negativity gap extends to their relative valuations. PepsiCo's price-to-sales ratio is nearly 18% below its five-year average. Coca-Cola's P/S ratio is only about 7% lower than its five-year average. Similarly, PepsiCo's price-to-earnings ratio is about 14% below its five-year average while Coca-Cola's P/E is roughly 2% below its average.

And then there are their dividend yields. At their current share prices, PepsiCo yields 3.5% while Coca-Cola yields 3.1%. On an absolute level, PepsiCo's yield is more attractive, but there's more to the story. While Coca-Cola's current yield is roughly middle of the road for the stock over recent years, PepsiCo's is near its all-time high. All in all, PepsiCo looks like the better value if you have a value bias when you invest.

PEP Dividend Yield data by YCharts.

Similarities and differences

To be fair, these companies are not exactly interchangeable even though their beverage businesses have material overlap. That said, they are similar in many ways. For example, both have increased their dividends annually for over 50 years, earning them both spots among the Dividend Kings. Members of that elite group have proven they can weather the inevitable ups and downs in the business world and keep rewarding their shareholders along the way.

But consider the difference between them. Coca-Cola has grown its revenue at a slightly faster clip over the past few years, and its earnings have increased at a dramatically faster pace. PepsiCo's full-year earnings growth rates have been stuck in the low single digits while Coca-Cola has been growing earnings at paces in the low double digits. In that light, it makes sense why investors appear to like Coca-Cola more than PepsiCo right now.

But there's another, more fundamental difference between the two companies. Coca-Cola sells beverages and only beverages. It's good at what it does, but it doesn't have much diversification. PepsiCo, by contrast, sells beverages, snacks, and packaged food products, and it's a major player in each of those businesses. For an investor who wants to gain broad portfolio exposure to the consumer staples sector, PepsiCo could provide that with a single investment. Coca-Cola can't. If diversification is important to you, you'll likely prefer PepsiCo.

Neither is a bad choice

The truth is that Coca-Cola and PepsiCo are both well-run companies that investors could comfortably buy and hold for decades. But if you are trying to maximize the income your portfolio generates, have a preference for value stocks, or like to own diversified businesses, PepsiCo is likely to be the better choice for your portfolio in 2025.

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Reuben Gregg Brewer has positions in PepsiCo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.