Financial Analyst
In determining the possible investment potential between companies, the essay analyzes the Coca Cola Company and PepsiCo for evaluation of the companies before any recommendations can be made on investments to a client. The analysis involves review of the companies’ background, analyze of stock trends, research on current events, and analyzing of the financial statements. Each company’s history, product and services, major customers, major suppliers, and leadership are considered to enable perfect selection of the investment opportunity for a potential investor.
The Coca cola Company is a beverage industry offering its services worldwide. The company’s headquarters are located in the US where Muhtar Kent is the current Chief Executive Officer (CEO). This Company has 146,200 employees while operating at Revenue of $ 48.01 billion by the year 2012 and therefore making a profit of $ 9 billion in the same year. Coca Cola Company is currently the largest beverage industry worldwide, noting that it has over 500 brands at supply to over 200 countries as noted in the Coca-Cola Company (KO) 2012 Annual Report. The company’s major competitors are PepsiCo Inc., Dr Pepper Snapple Group, Inc., Unilever, Groupe DANONE, Kraft Foods Inc. and Nestlé S.A among other companies in food and beverage industry.
According to the PepsiCo Inc. (PEP) 2012 Annual Report, Pepsi company is currently among major Food and Beverage Companies serving worldwide with its headquarters in the US. The current Chief Executive Officer (CEO) is Indra Nooyi. The company’s 2012 Annual report implicated that the company was operating at Revenue of $ 65.492 billion while the profit reflected in the same year was $ 6.178 billion. The total number of employees in the company is 297,000. The main competitors are in similar industry and they include; The Coca-Cola Company, Dr Pepper Snapple Group, Inc., Mondelez International, Inc., Hansen Natural Corporation, National Beverage Corp., Kraft Foods Inc., The Kellogg Company, ConAgra Foods, Inc. and Nestlé S.A. among others (PepsiCo, Inc. (PEP) 2012 Annual Report).
Table (a). The Coca Cola Company financial Data (In Billion Dollars)
| OPERATIONS | 2012 | 2011 | 2010 | 2009 |
| Net operating Revenues | $ 48.017 | $ 46.542 | $ 35.119 | $ 30.990 |
| Net Income | $ 9.019 | $ 8.584 | $ 11. 789 | $ 6.797 |
Graph of Both Coca Cola and PepsiCo Revenues and Profits (in billion)
Table (b). PepsiCo. Inc, financial Data (In Billion Dollars)
| OPERATIONS | 2012 | 2011 | 2010 | 2009 |
| Net operating Revenues | $ 65.492 | $ 66. 5 | $ 57.84 | $ 43.23 |
| Net Income | $ 6.178 | $ 6.44 | $ 6.32 | $ 5.95 |
Stock Price (in billion) for Coca-Cola Company and PepsiCo.
| 2012 | 2011 | 2010 | 2009 | |
| Coca-Cola | $ 36.22 | $ 35.00 | $ 32.68 | $ 28.79 |
| PepsiCo | $ 68.02 | $ 66.35 | $ 65.53 | $ 60.80 |
A graph of Stock Price (in billion) for Coca-Cola Company and PepsiCo.
Table (a) and (b) analysis in relation to stock price
In Table (a) on Coca Cola Company financial data and the graph, Revenues increased from initial Revenues of $ 30.990 in the year 2009, to the current Revenues at $ 48.017. From the 2012 Annual report, merger and acquisition has been the key to improving revenues and profit margins in Coca Cola Company leading to the increasing stock price. The data implicates high probability of Revenue increase in the next years, which will increase the profit margins along leading to increased stock price.
Table (b) on PepsiCo. Inc, financial Data from the graph shows an increase in the Revenue from $ 43.23 billion in the year 2009 to the current reported $ 65.492 billion which is relative to increase in stock price. Profit margins have not been increasing in the respective years but have remained average as per the graph. In attraction of potential investors in comparison to the Coca Cola Company, the maintained average profit margins by Pepsi gives a high speculation of the next profit margins. A company may operate at lower revenues like Coca Cola but make high profits, in comparison to PepsiCo. which has high Revenue but lower profit margin. The consistence in profit margin is an investment advantage since investors can perfectly speculate the profit margin in specific period, making PepsiCo their choice of investment opportunity.
Currently, Coca Cola Company has been striving to remain competitive through merger and acquisition as well as maintaining the company’s image. In January, 2013 the company acquired Sacramento Coca-Cola Bottling Company, which was followed by another acquisition of the Fresh Trading Ltd on 22nd Feb, 2013 as indicated by Bazil (2013). The most recent acquisition which has implicated improved stock price was the November, 2013 acquisition of ZICO Beverage LLC. These investment strategies have continuously improved the stock price of the company making it an investment opportunity for potential investors.
Considering the 2010 PepsiCo Inc. merger and acquisition, the company accomplished its acquisition of Pepsi Bottling Group, Inc. and PepsiAmericas, Inc. This was followed by formation of an alliance with a China food and beverage company Tingyi Holding in the year 2011. The current stock price indicates that merger and acquisitions have enabled prosperity and increased profit more so after the PepsiCo made an agreement with Diamond Star in the year 2012. In Myanmar, Diamond Star is one of the largest customer packaged goods distributer and PepsiCo collaborated that the company would import, sell and distribute Pepsi products within all its distribution reach. From consideration of the Company’s progress, the stock price is more probably going to improve gradually hence making it a good investment opportunity for investors.
In overall financial analysis, Coca Cola Company has been operating at Revenue of $ 48. 01 billion in the year 2012, which had a relative profit returns of $ 9.01 billion, this gives a Return on sales (ROS) of 18.77 percent. This is a great measure of profit margins where the percentage is far more than 10 percent and therefore, the investors would be more attracted to the high promising returns on their investment.
On the PepsiCo overall financial analysis, the company had Revenue of $ 65.492 billion and a profit of $ 6.178 billion by the 2012 financial report. This translated to a Return on sales (ROS) of 9.43 percent. In measure of profit margins, a percentage of ROS less than ten percent is not highly attractive though some investors believe in business growth and speculative profits as the PepsiCo average profit margin and therefore venture investments with PepsiCo.
In comparison of the 2012 Annual reports, the Coca Cola Company Return on sales (ROS) was 18.77 percent and for the PepsiCo, Return on sales (ROS) was 9.43 percent, Coca Cola Company has higher than 10 percentage ROS which indicates the high chance of increase of stock price in future. Though the PepsiCo ROS is lower than 10 percent, investors who believe in business growth may take a step and invest. Generally, an investor would prefer Coca Cola on bases of the calculations which implicate a promising future prosperity and increase in stock price. A choice of PepsiCo would be meaning full to investors who are focused on strict speculations, and therefore they can be able to calculate the profit margin estimate for a certain investment period.
References
United States Securities and Exchange Commission. Apr 24, 2013. 10-K. 2012 Annual report of PepsiCo, Inc.
United States Securities and Exchange Commission. Apr 24, 2013. 10-K. 2012 Annual report of Coca-Cola Company
Bazil, M. (2013). The Motley Fool. Coca-Cola Has a Prosperous 2013 Ahead of It
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