Coca-Cola Vs. PepsiCo: Which Beverage Giant Offers Stronger Upside After Q3 Earnings?

Morningstar favors PepsiCo’s recovery potential, citing its cheaper valuation.

• Coca-Cola’s Q3 revenue rose 7% to $13.4 billion, beating estimates, while comparable EPS increased to $0.91. 
• Despite beating Q3 earnings estimates, PepsiCo lowered its 2026 core EPS outlook.
• According to Koyfin data, PEP trades at a lower valuation compared to KO.  

Coca-Cola (KO) stock may get a boost from strong fiscal third-quarter (Q3) results and a new KFC deal, while PepsiCo (PEP) faces earnings headwinds and growth concerns. But with PepsiCo trading at a steep discount and offering a higher dividend, Wall Street sees a potential turnaround opportunity. 

Coca-Cola stock inched 0.5% lower in Wednesday’s premarket, while PepsiCo stock traded down nearly 1%.

Coca-Cola Gains Momentum As PepsiCo Faces Growth Challenges 

For decades, the battle between Coca-Cola and PepsiCo was defined by predictable, steady growth across North American retail and fountain channels. However, Q3 earnings performance signaled a widening operational divide between the two soft-drink giants. 

Coca-Cola’s Q3 revenue rose 7% year-on-year to $13.4 billion, beating analysts’ estimate of $12.92 billion, according to Fiscal.ai. Comparable earnings per share increased 11% to $0.91, above expectations of $0.88. Global sales volume grew 5%, led by India, China, Mexico and Brazil. Coca-Cola Zero Sugar volume jumped 16%, while its main Coca-Cola brand grew 5%. In North America, sales volume remained flat as growth in Coca-Cola drinks was offset by lower sales of water, sports drinks, coffee and tea. 

Meanwhile, though PepsiCo’s Q3 earnings beat estimates, it lowered its 2026 earnings growth forecast, expecting core earnings per share to rise 1%-2%, down from a prior outlook of 4%-6%. The company now expects core EPS growth of 2.5%-3.5%, down from 5%-7%. 

Additionally, KFC, owned by Yum! Brands (YUM), announced that it will switch to Coca-Cola beverages across the U.S. starting in January 2027. The move ends PepsiCo’s decades-long role as KFC’s exclusive U.S. beverage supplier. Coca-Cola products are expected to reach all U.S. KFC locations by spring 2027, giving it access to new customers and helping strengthen its presence in the fast-food industry. 

PEP, KO Stocks: Wall Street Analysis 

Morningstar analyst Kristoffer Inton said Coca-Cola stock’s rally this year leaves limited room for further gains, while rival PepsiCo I could offer investors a more attractive opportunity.

Inton attributed Coca-Cola’s Q3 results to its brand strength, demand for lower-cost options, zero-sugar products and effective execution in local markets. Prices increased 4%, although changes in geographic and product-category mix created a 3% drag.

Coca-Cola’s gross margin improved by 170 basis points, outpacing the increase in its comparable operating margin. Higher marketing spending contributed to the difference. The firm said it saw few major surprises in the results. The stock has gained more than 30% year to date, leading the analyst to consider it slightly overvalued, with investors seemingly expecting near-perfect execution.

Morningstar sees greater growth potential in PepsiCo, saying investors may be undervaluing its leading snacks business. The analyst expects new products and a stronger focus on affordable prices to help the company grow its annual revenue by around 4% to 6% over the next 10 years. 

According to Koyfin data, Coca-Cola has a higher valuation, with a price-to-earnings ratio (P/E) of 26.3x. This reflects its strong business performance, asset-light bottling model, and growing market share. PepsiCo is cheaper, trading at a 15.8x P/E, and offers a higher dividend yield of about 3.4%. 

Among 24 analysts covering PEP stock, 23 rate the stock either a ‘Buy’ or ‘Hold’ with a price target of $141.59, implying a 6% upside from the stock’s last close. For KO, 24 analysts out of 25 rate it either a ‘Buy’ or ‘Hold’ with a price target of $95.63, implying a 4% upside. 

KO, PEP Stocks: Retail View 

On Stocktwits, retail sentiment around KO stock remained ‘bullish’, while sentiment around PEP stock remained ‘bearish’.  

KO stock has gained 29% over the past twelve months, while PEP stock has declined 11%. 

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