At the beginning of 2026, Coca-Cola and Pepsi are seen as solid choices for investors looking for stability. These defensive stocks usually do well when the market faces corrections due to their steady demand. Coca-Cola has 64% institutional ownership, while Pepsi has 75%, indicating their reliability. Coca-Cola boasts a return on invested capital (ROIC) of 18%, which is higher than Pepsi’s 14%. Even though Pepsi diversifies into food and snacks, Coca-Cola concentrates mainly on beverages, showing its strong ability to turn investments into profits. In 2025, Coca-Cola’s earnings grew by 3%, reaching $2.98 per share. Analysts expect this to rise by 8% in 2026, hitting $3.22. During this time, sales are forecasted to climb 5% to $51.01 billion. For Pepsi, earnings in 2025 slightly dropped to $8.12, but a 5% increase to $8.55 is expected in 2026. Pepsi’s sales are anticipated to rise by 4% to $97.07 billion. Regarding valuation, Pepsi trades at 16 times its forward earnings, while Coca-Cola trades at a premium with a price of 6 times its forward sales. Coca-Cola’s annual dividend yield is at the industry average of 3%, while Pepsi offers a higher yield of 4%. Both companies are known as “Dividend Kings,” having raised their dividends for over fifty years. With the broader market close to all-time highs, investors are looking at defensive stocks like Coca-Cola and Pepsi. Their high institutional ownership—75% for Pepsi and 64% for Coca-Cola—points to their stability. The focus now shifts to their upcoming earnings reports. Pepsi will report on February 3rd, followed by Coca-Cola on February 10th, which could lead to short-term price changes. Pepsi seems to have a more appealing valuation at 16 times forward earnings, which is fair compared to its competitors. Notably, its Frito-Lay division showed strong organic revenue growth of 5% in the third quarter of 2025, which might lead to a positive surprise on February 3rd. Additionally, its higher 4% dividend yield adds a layer of support for its stock price. On the flip side, Coca-Cola is trading at a higher price, especially with its price to forward sales ratio of 6. This premium valuation may make it more susceptible to declines if its February 10th earnings report fails to meet expectations. Although its 18% return on invested capital is impressive, any weak forward guidance could prompt a sell-off. Currently, market volatility is low, as the VIX index remains near 14 through late 2025. This makes options premiums relatively cheap, allowing for positioning regarding potential earnings surprises at a low cost. For example, a trader worried about Coca-Cola’s valuation could consider buying put options ahead of its earnings report. Looking back at 2025, consumer sentiment from the University of Michigan improved unexpectedly in the last quarter, which could benefit both companies. However, history shows that even these sturdy giants can see a 4-6% stock decline if they miss revenue guidance after earnings are announced. Therefore, the guidance from the February reports will be just as crucial as the results from fiscal year 2025.

here to set up a live account on VT Markets now