Coca-Cola And PepsiCo Presentation

Coca Cola And Pepsico Presentationacc423httpwwwcoca

This presentation evaluates and compares key financial aspects of Coca-Cola and PepsiCo based on data from their respective fiscal years ending December 31, 2014. It examines the par or stated value of their common stock, the percentage of authorized shares issued, amounts of treasury stock held, outstanding shares, dividends declared, return on equity, payout ratios, stock price ranges, and share price performance during 2014. The analysis provides insights into each company's shareholder return strategies, stock market performance, and overall financial health, highlighting differences and similarities in their shareholder value management and financial policies.

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The comparative financial analysis of Coca-Cola and PepsiCo provides a comprehensive understanding of their equity structures, dividend strategies, and market performance during 2014. The evaluation begins with the fundamental details of each company's common stock, including par value, authorized shares, treasury stock holdings, and outstanding shares, followed by dividend payout data, return metrics, and market price fluctuations.

Common/Capital Stock and Share Structure

Both Coca-Cola and PepsiCo have established distinct par values for their common stock, reflecting their capital issuance policies. Coca-Cola's common stock has a par value of $0.25 per share, while PepsiCo's stock has a par value of approximately $0.0167 or 1/60th of a dollar per share. The significant difference in par values stems from differing corporate structuring decisions, with Coca-Cola opting for a higher nominal par, which in practice overshadows the economic implications in favor of share issuance flexibility.

Regarding the authorization and issuance of shares, Coca-Cola had approximately 70.4 million shares issued out of an authorized 112 million, meaning about 62.86% of its authorized shares were issued in 2014. PepsiCo, on the other hand, issued around 14.88 million shares out of an authorized 36 million, resulting in 41.33% of authorized shares issued. These figures suggest that Coca-Cola has authorized and issued a larger proportion of its total authorized shares than PepsiCo, signaling different growth or treasury strategies.

The treasury stock holdings reflect how each company manages its equity via buybacks or stock reserves. Coca-Cola held approximately 2.674 billion shares as treasury stock at year-end 2014, significantly higher than PepsiCo's 378 million shares. This disparity indicates Coca-Cola's more aggressive repurchase programs or stock reserve strategies to manage its share count and possibly support stock price stability or earnings per share metrics, compared to PepsiCo's more conservative approach.

Outstanding shares directly impact shareholder value and earnings per share (EPS). Coca-Cola had about 4.387 billion outstanding shares, whereas PepsiCo had approximately 1.488 billion. This considerable difference influences their market capitalization and investor perceptions, with Coca-Cola controlling a larger equity base but also bearing a larger share of diluted earnings.

Dividends and Shareholder Returns

Dividends serve as a primary method for companies to return value to shareholders. In 2014, Coca-Cola declared dividends of $1.22 per share, amounting to approximately $8.589 billion in total dividends paid. PepsiCo declared dividends at $2.5325 per share, totaling around $3.768 billion. Notably, while PepsiCo paid higher dividends per share, Coca-Cola issued substantially more shares, leading to a larger total payout in dollar terms.

The dividend payout ratios reveal strategic differences: Coca-Cola's payout ratio was approximately 75.10%, indicating a policy of returning a significant portion of net income to shareholders. PepsiCo's payout ratio was around 56.88%, reflecting a more conservative dividend policy that potentially earmarks funds for reinvestment or debt management.

Examining return on equity, Coca-Cola's 2014 ROE was approximately 23.57%, compared to PepsiCo's 19.49%. These figures underscore Coca-Cola's comparatively higher efficiency in generating profit from shareholder equity, although PepsiCo's longer-term strategies may favor sustainable growth and dividend stability over high ROE metrics.

The market price ranges for the fourth quarter of 2014 show Coca-Cola's stock traded between $39.80 and $45.00, whereas PepsiCo's stock ranged from $89.82 to $100.70. Both companies experienced stock price appreciation during 2014, but PepsiCo's stock price rose by a higher percentage, approximately 12.1%, compared to Coca-Cola's roughly 8.3%. This indicates stronger market enthusiasm for PepsiCo during that period, possibly driven by its higher dividend yield or growth prospects.

Financial Policies and Market Performance

The analysis also considers the broader financial policies. Coca-Cola's higher percentage of authorized shares issued and larger treasury stock holdings suggest a strategy oriented towards share repurchases, which can bolster EPS and stock prices. Conversely, PepsiCo's lower issuance percentage and treasury stock position reflect a more restrained approach, potentially prioritizing dividend stability and consistent payout ratios.

Return on capital, as evidenced by net income relative to average common equity, favors Coca-Cola, although PepsiCo offers a somewhat better yield to shareholders in terms of dividend payments relative to net income. The higher payout ratio of Coca-Cola reinforces its focus on returning earnings directly, aligning with its traditionally conservative dividend policy. In contrast, PepsiCo's lower payout ratio and more sustainable growth approach may appeal to investors seeking capital appreciation and dividend growth over time.

Market performance in the fourth quarter underscores the importance of investor sentiment, financial health, and strategic focus in determining share price movements. While Coca-Cola's stock traded at a lower high/low range, its solid dividend policy and consistent earnings illustrate stability, whereas PepsiCo's higher stock price and robust price appreciation reflect investor confidence in its growth and dividend strategy.

Conclusion

In conclusion, Coca-Cola and PepsiCo exhibit distinct financial strategies with unique implications for shareholders. Coca-Cola's higher proportion of authorized shares, larger treasury stock holdings, and aggressive payout ratio demonstrate a focus on shareholder returns through dividends and share buybacks, emphasizing stability and income. PepsiCo's lower treasury and authorized shares, combined with a higher dividend per share and stock price growth, suggest a strategy tailored toward growth, dividend sustainability, and maximizing shareholder value through appreciation. Both companies effectively leverage their capital structures to meet their strategic objectives, and their financial metrics from 2014 reflect differing priorities that cater to diverse investor preferences, whether income-oriented or growth-driven.

References

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  • PepsiCo. Inc. (2015). Annual Report on Form 10-K. Retrieved from https://www.sec.gov
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