Pepsi or Coca-Cola: Capital Efficiency and Growth Prospects in 2026

As major market indices reach record territory, sophisticated investors are turning to consumer staples as portfolio anchors. Two names consistently top the list: Coca-Cola KO and Pepsi PEP. While both command significant institutional backing (64% and 75% respectively), their paths forward differ meaningfully. The question becomes: which aligns better with your 2026 investment thesis?

The Capital Efficiency Divide: ROIC as the Deciding Factor

When evaluating management’s ability to deploy shareholder capital effectively, ROIC (return on invested capital) tells the story. Coca-Cola’s ROIC sits at 18%—approaching the 20%+ threshold that marks truly exceptional capital stewardship. This efficiency persists despite the company’s laser focus on beverages, suggesting a business model firing on all cylinders.

Pepsi’s ROIC, meanwhile, stands at 14%. Yes, the company has diversified into snacks and foods through Frito-Lay and Quaker, theoretically providing multiple growth vectors. Yet this diversification hasn’t translated into superior ROIC performance. Recent quarters have seen this metric trending downward, raising questions about whether broader portfolio strategies are delivering shareholder value.

For investors prioritizing how effectively management transforms every dollar of capital into profits, Coca-Cola’s ROIC advantage matters.

Projected Growth: Modest but Steady Momentum

Both companies are guiding toward incremental but reliable expansion. Coca-Cola wrapped fiscal 2025 with EPS growth of 3% to $2.98, with FY26 projections showing 8% EPS expansion to $3.22 per share. Revenue is forecast to climb 5% to $51.01 billion. The company will unveil Q4 2025 results on February 10.

Pepsi’s earnings narrative is more nuanced. FY25 EPS contracted marginally to $8.12 from $8.16 the prior year, signaling near-term headwinds. However, management expects a rebound in FY26, with EPS climbing 5% to $8.55. Sales are projected to rise 4% to $97.07 billion. Pepsi reports its Q4 2025 earnings on February 3.

Neither company is primed for explosive growth, but both demonstrate the resilience that defines consumer staples investing.

Valuation and Income: Where Pepsi Gains Ground

This is where the investment calculus shifts. Coca-Cola trades at a pronounced premium: 6X forward sales versus Pepsi’s 1.6X. On a price-to-forward earnings basis, the gap narrows but persists. Pepsi’s 16X forward P/E sits closer to industry benchmarks and suggests better value entry points for new capital.

Income investors find Pepsi equally compelling. The dividend yield reaches 4% versus Coca-Cola’s 3%—both yielding industry-average payouts. Yet both companies merit “Dividend King” status: Coca-Cola has lifted distributions for 63 consecutive years, while Pepsi has managed 53 years. This track record offers comfort during market volatility.

The Investment Case: Weighing Capital Efficiency Against Valuation

The trade-off crystallizes here. Coca-Cola offers superior ROIC and stronger earnings momentum, but demands a valuation premium that limits margin of safety. Pepsi sacrifices some capital efficiency but trades at a more rational multiple, delivering better dividend yield and less downside vulnerability if sentiment shifts.

For defensive equity positioning in early 2026, Pepsi checks more boxes despite Coca-Cola’s operational excellence. The higher dividend, reasonable valuation, and ROIC that remains respectable—if not stellar—make Pepsi the more pragmatic defensive choice when broader market indices flirt with all-time highs.