Do Pepsi Earnings Predict Coca-Cola Results?

PepsiCo, Inc. PEP reported yet another earnings beat on Monday on mostly in-line revenue for Q1. But what, if any, of an impact does Pepsi’s numbers have on The Coca-Cola Co KO and its stock?

To start off, Pepsi’s beat was on the strength of its North American business, not its international business. In fact, CEO Indra Nooyi told investors that the international business is “a difficult environment.”

Related Link: Coke Vs. Pepsi: Which Beats Low Q1 Earnings Expectations?

That sentiment certainly doesn’t bode well for Coca-Cola. In 2015, Pepsi generated about 44 percent of its total revenue internationally, while international sales represented 54 percent of Coke’s total revenue.

In early Tuesday trading, both stocks are trading mostly flat.

Forever Linked

The companies will forever be tied to each other because of their businesses, but does Pepsi’s earnings report shed some light on what Coke investors can expect from Q1?

A look back on the companies’ last seven earnings reports shows that Pepsi’s earnings have very little predictive value when it comes to Coca-Cola.

Pepsi has now produced earnings beats in six of its last seven reports. Coca-Cola is a perfect seven for seven in earnings beats during that time.

Prior to the modest Q1 revenue miss from Pepsi, it had produced seven consecutive quarters of revenue beats. Coke, on the other hand, had three revenue misses during that span.

The international weakness would seem to suggest that Coke will continue to have a slightly rougher go of it that Pepsi. That theme has certainly been reflected in the relative performances of the two stocks in the past two years: Pepsi is up 21.0 percent and Coke is up 13.7 percent.

Disclosure: The author holds no position in the stocks mentioned.