Global beverage and food giant PepsiCo (NYSE:PEP) reported anemic sales and profit growth during its first quarter, but the next couple of years should see accelerated growth trends. This coupled with a more reasonable valuation than an archrival makes Pepsi a more appealing investment.

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First Quarter Recap

Total net revenues advanced 4% to $12.4 billion. Pepsi divides its results into three primary geographic regions. The Americas, which is divided into the food and beverage product segments, reported growth of 5% and a fall of 2%, respectively. Quaker Foods North America was the laggard with negative growth of 3% and the beverage operations, which are closely aligned with Yum Brands' (NYSE:YUM) domestic restaurants, also logged negative growth of 2%. Latin American food growth was strongest at 11%, while Frito Lay North America also performed admirably and reported top line growth of 4%. Europe reported surprisingly robust growth of 13% while Asia was also strong, up 12%.
Higher commodity costs and sluggish sales growth resulted in a divisional operating profit fall of 1% to $1.9 billion, though the profit level was still quite healthy at 15.3%. Reported earnings growth was flat at 71 cents per diluted share. However, Pepsi estimated its core, or operating profit growth was negative at 6%.

SEE: Understanding The Income Statement

Outlook and Valuation
Analysts project very modest full year sales growth of 2.4% and total sales of $67.5 billion. The current earnings projection currently stands at $4.11 per share. Growth for 2013 is expected to improve to sales growth of 4.5% (total sales of nearly $71 billion) and profit growth of 8.3% to $4.44 per share. This represents a forward P/E of 16.1 and 14.9, respectively, base off the current share price of $66 per share.

The Bottom Line
Over the next couple of years, Pepsi and archrival Coca Cola (NYSE:KO), which is currently thought to be interested in acquiring fast-growing rival Monster Beverage (Nasdaq:MNST), should grow at about the same rate. However, Coca Cola has been posting much higher growth levels in recent years and investors have awarded it with a higher forward earnings multiple of 17.11, based off 2013 full year projections.

Pepsi currently sports a higher dividend yield of 3.1%, versus Coke's 2.7%. Dr. Pepper Snapple (NYSE:DPS) is the highest at 3.4%, but will be slower growing because it serves primarily the U.S. market. Coke and Pepsi offer a decent combination of modest growth with downside protection given underlying demand is generally stable. But Pepsi looks the better investment given its lower earnings multiple.

SEE: 5 Must-Have Metrics For Value Investors

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At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

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