Head-To-Head Contrast: PepsiCo (PEP) and Constellation Brands (STZ)

PepsiCo (NASDAQ: PEP) and Constellation Brands (NYSE:STZ) are both large-cap consumer staples companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitability, analyst recommendations and dividends.

Valuation and Earnings

This table compares PepsiCo and Constellation Brands’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PepsiCo $63.53 billion 2.24 $4.86 billion $5.23 19.15
Constellation Brands $8.33 billion 4.98 $2.32 billion $8.72 24.85

PepsiCo has higher revenue and earnings than Constellation Brands. PepsiCo is trading at a lower price-to-earnings ratio than Constellation Brands, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares PepsiCo and Constellation Brands’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PepsiCo 7.62% 62.43% 9.52%
Constellation Brands 27.85% 22.28% 8.86%

Volatility and Risk

PepsiCo has a beta of 0.67, meaning that its stock price is 33% less volatile than the S&P 500. Comparatively, Constellation Brands has a beta of 0.09, meaning that its stock price is 91% less volatile than the S&P 500.

Dividends

PepsiCo pays an annual dividend of $3.22 per share and has a dividend yield of 3.2%. Constellation Brands pays an annual dividend of $2.96 per share and has a dividend yield of 1.4%. PepsiCo pays out 61.6% of its earnings in the form of a dividend. Constellation Brands pays out 33.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Constellation Brands has increased its dividend for 2 consecutive years.

Analyst Recommendations

This is a summary of current ratings and price targets for PepsiCo and Constellation Brands, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PepsiCo 1 8 5 0 2.29
Constellation Brands 0 6 15 0 2.71

PepsiCo presently has a consensus price target of $119.54, indicating a potential upside of 19.36%. Constellation Brands has a consensus price target of $246.00, indicating a potential upside of 13.54%. Given PepsiCo’s higher possible upside, research analysts clearly believe PepsiCo is more favorable than Constellation Brands.

Institutional & Insider Ownership

69.9% of PepsiCo shares are held by institutional investors. Comparatively, 72.5% of Constellation Brands shares are held by institutional investors. 0.3% of PepsiCo shares are held by insiders. Comparatively, 15.6% of Constellation Brands shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Constellation Brands beats PepsiCo on 10 of the 17 factors compared between the two stocks.

PepsiCo Company Profile

PepsiCo, Inc. operates as a food and beverage company worldwide. Its Frito-Lay North America segment offers Lay's and Ruffles potato chips; Doritos, Tostitos, and Santitas tortilla chips; and Cheetos snacks, branded dips, and Fritos corn chips. The company's Quaker Foods North America segment provides cereals, rice, pasta, mixes and syrups, granola bars, grits, oat squares, oatmeal, rice cakes, simply granola, and side dishes under the brands Quaker, Aunt Jemima, Cap'n crunch, life, Quaker Chewy, and Rice-A-Roni. Its North America Beverages segment offers beverage concentrates, fountain syrups, and finished goods under the Aquafina, Diet Mountain Dew, Diet Pepsi, Gatorade, Mist Twst, Mountain Dew, Pepsi, Propel, and Tropicana brands; and ready-to-drink tea, coffee, and juices. The company's Latin America segment provides snack foods under the Cheetos, Doritos, Emperador, Lay's, Marias Gamesa, Rosquinhas Mabel, Ruffles, Sabritas, Saladitas, and Tostitos; cereals and snacks under the Quaker brand; and beverage concentrates, fountain syrups, and finished goods under the 7UP, Diet Pepsi, Gatorade, H2oh!, Manzanita Sol, Mirinda, Pepsi, and Toddy brands. Its Europe Sub-Saharan Africa segment offers snack food; cereals and snacks; beverage concentrates, fountain syrups, and finished goods; ready-to-drink tea products; and dairy products under the Agusha, Chudo, and Domik v Derevne brand names. The company's Asia, Middle East and North Africa segment provides snack foods under the Cheetos, Chipsy, Crunchy, Doritos, Kurkure, and Lay's brands; cereals and snacks under the Quaker brand; beverage concentrates, fountain syrups, and finished goods; and ready-to-drink tea products. The company was founded in 1898 and is headquartered in Purchase, New York.

Constellation Brands Company Profile

Constellation Brands, Inc., together with its subsidiaries, produces, imports, and markets beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. The company sells wine across various categories, including table wine, sparkling wine, and dessert wine. It offers beer primarily under the Corona Extra, Corona Light, Modelo Especial, Modelo Negra, and Pacifico brands; wine under the Black Box, Clos du Bois, Estancia, Franciscan Estate, Inniskillin, Kim Crawford, Mark West, Meiomi, Mount Veeder, Nobilo, Robert Mondavi, Ruffino, Saved, Simi, The Dreaming Tree, The Prisoner, Charles Smith, and Wild Horse brands; and sprits under the SVEDKA vodka, Black Velvet Canadian whisky, Casa Noble tequila, High West craft whisky brands. The company offers its products to wholesale distributors, retailers, on-premise locations, and government alcohol beverage control agencies. Constellation Brands, Inc. was founded in 1945 and is headquartered in Victor, New York.

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