Shares of Coca-Cola Co. slumped 0.9% and PepsiCo Inc.'s stock dropped 0.4% in morning trade Wednesday, after the non-alcoholic beverage giants were downgraded at BMO Capital, due primarily because of valuation. Coke's stock was the leading decliner in the Dow Jones Industrial Average . Analyst Amit Sharma cut his ratings on the companies to market perform from outperform, saying "it's difficult to argue for meaningful multiple expansion from current levels, particularly given that earnings growth is unlikely to significantly accelerate in the next 12-18 months." Coke's stock closed Tuesday 1.9% below its April 4, 2016 record close of $46.89, while Pepsi's stock closed 0.3% below its May 30, 2017 record of $118.01. Sharma doesn't expect the stocks to sell off, however, as he believes an investor focus on "safety" and the reversal of the "Trump trade" that had boosted economically sensitive sectors after the election, could continue to support current elevated valuations for the consumer staples sector heavyweights. Separately, Sharma upgraded rivals Dr. Pepper Snapple Group Inc. and Cott Corp. to outperform from market perform, citing "depressed" valuation and "more attractive" earnings growth potential. The SPDR Consumer Staples Select Sector ETF has run up 10.5% year to date, while the S&P 500 has gained 8.7%.
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