Great comparison of food stocks. Which one do analysts think is the best one to buy?
Are you looking for a safe stock that could take a place in your portfolio? If you're deciding between these big and well-known players, a Wall Street opinion might help.
In times of macroeconomic uncertainty, investors often seek refuge in companies that have stable earnings, strong balance sheets and the ability to grow. Mega-caps, companies with a market capitalization of over $200 billion, may be just such investment opportunities. In this article, we focus on three such companies. Which one does Wall Street think is currently the best one to buy?
Coca-Cola $KO+0.5%
Coca-Cola
KOAs one of the most recognizable brands in the world, Coca-Cola enjoys a strong position in the beverage market. The company has long invested in innovation and product diversification, which includes low-calorie drinks, energy drinks and even experimentation with alcoholic beverages. Coca-Cola also works with smaller brands through acquisitions and partnerships, allowing it to respond more quickly to changing consumer preferences while maintaining a competitive advantage. In addition, Coca-Cola has a strong supply chain, an efficient distribution system and a high level of customer loyalty.
Coca-Cola saw a 12% increase in organic sales and a 6% increase in net profit in the first quarter of 2023. This growth was driven largely by strong product demand and the ability to raise prices to eliminate inflation and maintain operating margins.
Also important to Coca-Cola is its commitment to sustainability and reducing its environmental impact. The company has committed to ambitious targets such as reducing greenhouse gas emissions by 25% by 2030 and ensuring that 100% of its packaging is recyclable, compostable or biodegradable. These targets attract environmentally conscious investors while contributing to positive brand perception.
Citigroup analyst Fillipo Falorni, is quite bullish on Coca-Cola's stock.
The company delivered solid earnings in the first quarter, while cautiously setting its outlook due to macro uncertainty and a softer landing at the start of the second quarter in April. We believe the company's fundamentals remain solid, and are supported by price stability and strong emerging market trends.
Along with this comment, Falorini has raised its price target to $74. A total of 15 analysts have looked at the stock over the last while and have agreed on an average price target of $69, an increase of just under 8%.
PepsiCo $PEP-0.5%
PepsiCo
PEPPepsiCo is unique among its competitors because of its combination of food and beverage businesses. The company is known for its brands such as Pepsi, Gatorade, Tropicana, Quaker Oats and Frito-Lay. PepsiCo focuses on innovation and sustainability in its products, which includes reducing sugar, salt and fat in food and beverages and investing in recyclable packaging. With a strong brand portfolio and diversification of revenues, PepsiCo is better able to weather fluctuations in individual market segments. The company also benefits from the geographic diversity of its revenues, which reduces the risk associated with regional economic fluctuations.
PepsiCo saw revenue grow 10.2% to $17.8 billion in the first quarter of 2023, and adjusted earnings per share rose more than 16% to $1.50. Again, this growth would be driven primarily by strong product demand combined with product price increases. These companies can afford to do this mainly because of their strong brand.
In addition to its strong product portfolio, PepsiCo is also committed to corporate social responsibility and sustainability. The company invests in the communities in which it operates and supports the development of agricultural projects and innovative solutions that reduce environmental impact. PepsiCo has also partnered with several environmental and social organizations, helping the company to strengthen its position as a leader in sustainability and corporate social responsibility.
The company has found fans, too, and one of them is Goldman Sachs analyst Bonnie Herzog.
The company is well positioned in the market, given its robust brand portfolio and prospects for long-term growth in the beverage business.
Along with that comment, Herzog raised her price target to $208. A total of 11 analysts have recently looked at the company and have agreed on an average target price of $191, which represents a stagnant share price.
McDonald's $MCD+0.8%
McDonald's
MCDMcDonald's is one of the largest quick-service restaurant chains in the world, operating in more than 100 countries. The company is constantly innovating its menu to meet changing consumer trends such as interest in healthier options, plant-based products and local flavors. McDonald's is also investing in technology solutions such as digitizing orders, improving drive-thru and developing its own food delivery. These measures allow McDonald's to streamline operations, increase customer satisfaction and remain competitive in the rapidly changing fast food industry.
The company's total sales increased by 4% to USD 5.9 billion. Adjusted earnings per share rose 15%. Management said the increase was driven primarily by a balanced combination of price increases and positive traffic growth. Another major contributor to this growth was the economic recovery in China.
Another key aspect of McDonald's success is its franchise model. The company has more than 38,000 restaurants worldwide, most of which are operated by independent franchisees. This model allows McDonald's to expand rapidly, adapt to local markets and minimise operational risks. The company is also focused on strengthening its commitment to sustainability and social responsibility, which includes reducing plastic consumption, promoting sustainable agriculture, and developing community and employee-focused programs.
RBC Capital analyst Christopher Carril likes this stock for a change.
We believe Q1 sales momentum and consistent performance across segments reflected the impact of management's past investments in reimaging, marketing execution and digital initiatives. We believe the company is well positioned in the current macro environment supported by continued focus on core menu and improving restaurant operations.
Along with this comment, Carril raised its price target to $316. A total of 29 analysts recently looked at the stock and agreed on an average price target of $315, an increase of just under 7%.
So which one?
Well, if we take it from an analyst perspective, Wall Street is more bullish on Coca-Cola and McDonald's compared to PepsiCo. This positive sentiment is reflected in higher price targets. The optimism may be due to a combination of strong sales growth, innovation and the potential for further growth in new segments. More specifically, analysts believe that Coca-Cola currently offers the greatest growth potential. However, it is also important to analyse all companies and draw our own conclusions. This can only serve as one clue to the puzzle.
So, if you still can't make up your mind after you have analysed all 3 stocks, the analysts' views may help you in part. However, it is important that you consider these opinions only as part of the puzzle and do not base your investment decisions purely on these opinions.
WARNING: I am not a financial advisor, and this material does not serve as a financial or investment recommendation. The content of this material is purely informational.