Coca-Cola European Partners Versus Coca-Cola: Which Is Better?

This means that the bottling company has a weaker competitive position than KO itself.

The benefits of businesses’ competitive advantages can be seen from their performance during periods of economic recession. More specifically, we’ll be looking at their EPS trend during the 2008-2009 financial crisis.

Let’s begin with KO:

  • 2007: $1.29
  • 2008: $1.51 (17% growth)
  • 2009: $1.47 (3% decline, recession low)
  • 2010: $1.75 (19% growth, new high)

KO experienced only a minimal (3%) decline in earnings during the financial crisis.

Unfortunately, the same type of earnings comparison would not be useful for CCE. The company has gone through two major restructurings – first, selling their North American bottling operations to KO in 2010 and secondly, the significant merger in 2016. Today’s CCE’s looks dramatically different than 2008’s.

That being said, I’m reasonably confident that CCE’s recession performance would be similar to KO’s, if not a bit worse. This is because KO has the upper hand when it comes to competitive advantage.

Valuation

The last comparison I’ll make between these two companies is valuation. We will see that KO trades at a slight premium to CCE.

With the exclusion of a few outliers in 2000-2002, KO is currently trading at a higher valuation multiple than at any time in recent history.  The black line in the image below shows KO’s current valuation multiple relative to its historical valuation multiples.

KO PE Analysis

Source: Value Line

If KO’s valuation multiple falls to a more normalized level, this will present a more attractive buying opportunity.

That being said, the company’s higher-than-average valuation is in line with most of the rest of the stock market. The S&P 500’s current price-to-earnings multiple is higher than any time in history excluding the dot-com bubble and the global financial crisis.

S&P 500 PE Ratio

Source: Multpl

This explains KO’s current valuation premium.

Looking at CCE, the company’s stock has decline substantially over the past few months. This may indicate a buying opportunity.

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Disclosure: 

Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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