Our analysis in this dashboard shows the potential upside available to Coca-Cola's (NYSE: KO) margins and stock price if it cuts down on its advertising and marketing expenditure over the next two years. We have compared KO's metrics with those of PepsiCo (NYSE: PEP).Currently KO's ad expense is almost double that of PEP, whereas its revenue is half of PEP.
If KO focuses on digital marketing and advertising its healthy products mainly, it would likely lead to a steady uptick in margins and earnings in 2019 and 2020. This is in contrast to a sharp decline in PEP's margins and earnings in 2019, mainly due to strong base effect (margins were unusually high in 2018 due to huge tax benefit received during the year).If KO is able to close its existing advertising expenditure gap with PEP, KO's stock could return between 10%-10.5%
in the next two years, as against 3%-5%
in the case of PEP's stock
In some of the below charts, we have shown KO's and PEP's metrics together for comparison purposes.
You may use the following key to identify the metrics for these companies.
1) Dotted line (........................) indicates a metric for PepsiCo
2) Straight Blue Line indicates a metric for Coca-Cola
[Please note: The above key is applicable only when the "blue straight line" and the "dotted line" appear together in the same chart for comparison purpose]