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KO – Coca-Cola: Don’t Anchor To The Past

Written by Jonathan Wheeler on February 9, 2023. Posted in KO, Stock Report.

Old Coca-cola sign on building — J. Michael Jones/iStock Editorial via Getty Images

Coca-Cola (NYSE:KO) is a company with a brand known by almost every person in the world. The length of its operating history and strength of its marketing have put it in a position to drive significant returns for its shareholders over time. Adding on to that, Buffett’s legendary investment in KO back in the 1980’s is discussed consistently in value circles, and it’s elevated KO to an almost untouchable status among many investors.

However, it’s highly likely the next 2 decades won’t look like the last 2 did for the company. KO is operated well enough that it will likely continue to churn out profits and may even manage continued sales and volume growth over the medium term. Debt has climbed consistently over the past 10 years, the company has relied heavily on acquisitions to change its volume mix in the face of rapidly shifting consumer tastes, and investors today have to hang their hat on further international penetration.

Quarterly results — Company Press Release

Looking at the most recent quarter, the company drove solid results. With revenues up 10%, or 16% adjusted, and EPS up 14% or 7% adjusted, that’s solid for an old stalwart like KO. Management is projecting 14-16% revenue growth on the full year, with 15-16% EPS growth and $10.5B in free cash flow.

Zooming out a little bit, some of these numbers can be put into perspective. The company is bouncing back well, but revenue growth overall has not been increasing at the blistering pace one could glean from the quarterly earnings report.

With the difficult macroeconomic environment, KO is well-positioned to shield itself from much of the pain due to its strong distributor and bottling partnerships and rock-solid pricing power. However, international distribution will be more difficult to manage compared to the disparate and smaller distributors in America.

In the face of significant headwinds in the home market, KO has shifted its brand mix over time and continues to try and move away from the image of sugary, unhealthy beverages. Most recently, the company’s acquisitions of Body Armor and Costa coffee look to leverage the company’s global reach to maintain volumes. The company is among an elite group that has managed to find broad success globally, with Sprite recently becoming a $1B brand in India, and emerging markets will continue to be the major growth driver for KO as we look ahead.

Through the shifts in the business, KO has maintained a positive economic spread for its shareholders. With a company continuously pushing through acquisitions to maintain relevance, management has obviously made the right moves with returns on invested capital trending mostly up over the past 5 years.

On an incredibly zoomed out scale, you can see the consistency KO has given shareholders over time. Operating margins trended up over the long-run, but gross margins remained mostly flat. I wouldn’t be looking for KO to expand its operating margin significantly from here. The company will more than likely maintain its long-run advertising expenses around 10.5% of sales, and I don’t see any firm path to other cost-cutting that would significantly improve the company’s operating margin picture.

There are few companies with as straight of a line in dividends over a 30 year period as KO. The company’s payout ratio now stands at 75%, long-term debt is at $35.4B with a debt to equity of 1.56X, and dividends represent about 69% of free cash flow. Dividend growth has not been fantastic, but it’s also not some of the other old-line companies 1-2% increases just to maintain the track record. With 60 years of consecutive dividend increases, KO actually has the room to at the very least continue to raise it in-line with earnings growth. However, with the debt load the company now carries, it is more likely to see these types of ~4% increases to give the company more wiggle room. The thing I want to point out here is that KO has shifted its company over time well to accommodate headwinds in consumer tastes. But with the company’s debt load and 75% of earnings going out the door as dividends, it will be more difficult for the company to continue to snatch up brands over time. I’m not calling for a liquidity crisis or doom and gloom here, but growth won’t be as easy going forward as it was when the company quadrupled its debt load from 2010-2020.

So, I think I’ve made the point that KO is a fantastic operator and a model of consistency, but I have some concerns moving forward for the company. However, looking above, the valuation doesn’t reflect that at all. At 24X earnings, KO is above its long-term average, from when things were likely rosier than they are today. At a dividend yield of around 3%, it’s a tough comp to today’s 30-year treasury note of 3.7% with no risk. If you’re looking at KO as an income play, the shine is off somewhat with rates up.

I don’t forecast or expect investors to lose money buying KO. What I do expect is that a purchase at today’s valuation doesn’t account for the actual likely path for KO from here. The company is likely to continue driving revenue and earnings growth, albeit somewhere in the single-digits. An investment at today’s valuation based on analyst estimates for earnings growth and a return to the long-run average (assuming the company should remain at that multiple) could yield around 6% annualized total returns. Half of that comes from the dividend.

Companies like KO can be a touchy subject for long-time holders. I’m in awe of KO’s brand and pricing power, and the fact the company continues to reinvent itself to stay relevant. However, I just don’t see the case for an investment today. There are much better opportunities out there for income, dividend growth, or just growth in general. There are also much cheaper ones. KO stock is a hold, I won’t be buying any.

KO – Warren Buffett More Than Doubles His Money on This Stock Every 2 Years

Written by Sean Williams on February 6, 2023. Posted in KO, Stock Report.

When Berkshire Hathaway (BRK.A -1.14%) (BRK.B -1.07%) CEO Warren Buffett buys or sells stock, new and tenured investors wisely pay close attention. That’s because the Oracle of Omaha, as he’s come to be known, has run circles around Wall Street for nearly six decades. Since becoming CEO in 1965, he’s delivered an aggregate return on the company’s Class A shares (BRK.A) of 3,813,861%, through the closing bell on Feb. 2, 2023.

Warren Buffett’s secret to success isn’t fancy software or charting tools. Rather, it’s buying high-quality, brand-name, cyclical businesses, and allowing his investment thesis to play out over many years, if not decades. It just so happens that many of these time-tested businesses also pay a dividend.

A smiling Warren Buffett at Berkshire Hathaway's annual shareholder meeting.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

If there’s an unsung hero to Berkshire Hathaway’s investment portfolio, it’s the company’s dividend income. In 2023, Buffett’s company is on pace to collect more than $6 billion in dividend income, with a half-dozen holdings accounting for more than $4.8 billion of that total. It’s these income juggernauts that have played a monumental role in stabilizing Berkshire Hathaway during economic downturns and helping it significantly outperform over multiple decades.

One Buffett stock is more than doubling his initial investment every two years

But one of these dividend stocks is truly in a class of its own, and is responsible for more than doubling the Oracle of Omaha’s initial investment every two years.

Out of the roughly four dozen securities held by Berkshire Hathaway sits Warren Buffett’s longest-held investment — beverage stock Coca-Cola (KO -0.75%). Coke has been a continuous holding for Buffett’s company since 1988. The 400 million shares held at a cost basis of $1.299 billion equates to a per-share cost basis of just $3.2475.

KO Dividend data by YCharts.

One area where Coca-Cola has absolutely shone bright is in the dividend department. Last February, the company’s board of directors approved its 60th consecutive annual dividend increase. You can just about count on two hands the number of publicly traded companies with a longer existing streak of continuous base annual dividend hikes than Coke. Since the beginning of 2010, Coca-Cola has returned a cumulative $76.8 billion to its shareholders with its dividend.

At the moment, Coca-Cola’s base annual payout sits at $1.76/share. I say “at the moment,” because the company is just over a week away from its fourth-quarter earnings release. The company’s fourth-quarter release/annual roundup is when it announces an increase to its base annual payout.

With Berkshire Hathaway receiving $1.76 for each of its 400 million shares owned, it’s pocketing a cool $704 million in annual dividend income. More importantly, the $1.76/share payout relative to Berkshire’s $3.2475/share cost basis works out to a 54.2% yield. Based solely on dividend income, Coca-Cola is helping to more than double Warren Buffett’s initial investment every two years.

Two people clanking their Coca-Cola bottles together while seated and chatting outside.

Image source: Coca-Cola.

Here’s why Coca-Cola has been such a rock-solid investment for the Oracle of Omaha

If you wondering what’s made Coca-Cola such a fantastic investment for Warren Buffett and his investing team over the past 35 years, you’re not going to settle on a single point. Rather, it’s been a confluence of macro and company-specific factors.

For example, the vast majority of the beverage products Coke sells can be viewed as nondiscretionary. In simpler terms, no matter how well or poorly the domestic or global economy are performing, consumers are unlikely to change their consumption habits. Since everyone needs to eat and drink, demand for Coca-Cola products tends to remain consistent and predictable year in and year out.

On a more company-specific basis, Coca-Cola’s geographic diversity, marketing, and margin levers are helping to steadily move its profit needle higher.

With the exception of North Korea, Cuba, and Russia (due to its invasion of Ukraine), Coca-Cola has ongoing operations in every other country around the world. This allows it to take advantage of higher organic growth rates in developing and emerging markets, where it currently holds 6% of all commercial beverage volume. It can also generate highly predictable operating cash flow in developed markets, where it accounts for 14% of all commercial beverage volume.

In terms of marketing, Coke is nothing short of a superstar. Aside from being, arguably, the most-recognized consumer staples brand in the world, the company’s marketing department is able to easily connect with multiple age groups. Whereas younger consumers are lured by Coca-Cola’s social media campaigns and easily identifiable brand ambassadors, more mature audiences are liable to connect the Coca-Cola brand with its ties to the holidays (more specifically, by using Santa Claus in advertisements). Very few companies have the ability to engage and connect with consumers quite like Coca-Cola.

Lastly, there’s Coca-Cola’s ability to use its scale and marketing prowess to its advantage. Refining its supply chains, which includes sourcing products locally, reducing its selling, general, and administrative (SG&A) expenses as a percentage of total sales (without doing less with the capital it’s apportioned for SG&A), and leaning on dynamic pricing and promotion models, can help the company drive sales while delivering higher operating margin.

Even though Coca-Cola’s growth heyday is a distant memory, this beverage giant continues to deliver in a big way for Warren Buffett and Berkshire Hathaway’s long-term shareholders.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, long January 2024 $47.50 calls on Coca-Cola, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool has a disclosure policy.

KO – Here’s How Much Warren Buffett Has Earned From Coca-Cola’s Dividend

Written by Will Healy on January 27, 2023. Posted in KO, Stock Report.

One of the more notable investments in acclaimed investor Warren Buffett’s career was Coca-Cola (KO -0.20%). Buffett is a longtime fan of its signature drink, a factor that likely helped inspire the 9% stake that his company, Berkshire Hathaway (BRK.A -0.36%) (BRK.B -0.30%), took in the beverage giant in 1988.

But despite the gains made over 35 years, the investment has arguably earned more attention for Buffett as a dividend stock. Investors should capitalize on that attention, as it offers a lesson about the benefits of dividend growth and shows how payouts play a potential role in driving a long-term investment strategy.

Berkshire’s dividend income from Coca-Cola

Berkshire owns 400 million shares of Coca-Cola stock. Consequently, the $1.76 per share annual dividend earns new buyers a cash return of around 2.9%, well above the 1.7% return of the S&P 500.

But both are a pittance of Berkshire’s yield in Coca-Cola. In 2022, Berkshire received $704 million in dividend income from Coca-Cola. On an original investment of $1.3 billion, that amounted to a yearly return of 54%!

That return is so high because Berkshire bought most of its Coca-Cola shares in 1988 and 1989, beginning the purchases soon after the 1987 stock market crash. Moreover, Coca-Cola has maintained a 60-year streak of payout hikes, making it a Dividend King. Hence, those 35 years of payouts have earned Berkshire nearly $10.2 billion in dividend income from this stock!

Putting the Coca-Cola investment into perspective

Although that sounds like an impressive return on a $1.3 billion investment, some factors may discount the significance and appeal of Coca-Cola’s dividend. For one, Berkshire’s stake in Coca-Cola is now worth just over $24 billion. That means that stock price growth drove the majority of Berkshire’s total return in this stock, not dividends.

Investors should also remember that Coca-Cola stock is likely not a buy at this stage. An implicit confirmation of that feeling appears to come from Buffett himself, as Berkshire bought its last stake in the company in 1994. Even then, the dividend could be the only reason Buffett’s team treated this stock as a hold rather than a sell.

That dividend may also face an uncertain future. Coca-Cola generated $7.3 billion in free cash flow in the first nine months of 2022. Dividends and payables cost the company about $5.8 billion, leaving little capital for share repurchases or investments in the company. That also makes future payout hikes more difficult without a meaningful improvement in free cash flow.

Where the opportunity may lie

For now, Coca-Cola can make you money in your sleep, but neither its yield nor Berkshire’s investment in Coca-Cola are clear signs to buy the beverage stock.

Still, considering Berkshire’s dividend gains, it can serve as a lesson to invest in dividend stocks like Buffett. While few investors will earn a $10.2 billion dividend return, they can find dividend stocks that, if held for the long term, will return the original investment back in payouts, perhaps several times over.

The timing may be right for such a strategy. Much like the aftermath of the 1987 stock market crash, numerous stocks trade at a discount in the current bear market.

Additionally, many of these stocks are either Dividend Kings or have increased their dividends annually for several years. Buffett’s choice of Coca-Cola shows that investors can apply this strategy to conservative, large-cap stocks and possibly earn outsized dividend returns.

Will Healy has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, long January 2024 $47.50 calls on Coca-Cola, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool has a disclosure policy.

KO – Coke (KO) Up 0.7% Since Last Earnings Report: Can It Continue?

Written by Zacks Equity Research on August 20, 2021. Posted in KO, Stock Report.

A month has gone by since the last earnings report for Coca-Cola (KO – Free Report) . Shares have added about 0.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Coke due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Coca-Cola Tops Q2 Earnings & Sales Estimates, Raises View

Coca-Cola has delivered second-quarter 2021 results, wherein earnings and sales beat the Zacks Consensus Estimate and improved year over year. Comparable earnings of 68 cents per share beat the Zacks Consensus Estimate of 57 cents and improved 61% from the year-ago period. Favorable currency translations aided earnings by 5%. Comparable currency-neutral earnings per share rose 55%.

Revenues of $10,129 million surpassed the Zacks Consensus Estimate of $9,490 million and improved 42% year over year. Organic revenues rose 37% from the prior-year quarter. The company’s top line benefited from improved price/mix and an increase in concentrate sales. Revenues gained from the ongoing recovery in markets where the pandemic-led disruptions are subsiding. The results also reflected benefits from cycling of revenue declines witnessed in the prior-year quarter.

In the reported quarter, the company gained global value share in total non-alcoholic ready-to-drink (“NARTD”) beverages. Coca-Cola benefited from underlying share gains in both at-home and away-from-home channels. The company’s value share in total NARTD beverages has improved from the 2019 level.

Volume and Pricing

In the reported quarter, concentrate sales were up 26%, while price/mix rose 11%. However, currency tailwinds aided the company’s top line by 5%.

Price/mix benefited from favorable channel and package mix due to the lapping of last year’s pandemic-led disruptions as well as positive segment mix in Global Ventures and Bottling Investments. Concentrate sales were 9 points ahead of unit case volume, as the company lapped the period of rationalized stock levels in the prior-year quarter. Concentrate sales also benefited from the timing of shipments this year.

Coca-Cola’s total unit case volume grew 18% in the second quarter and was in line with the 2019 levels, backed by recovery across markets due to the subsiding of the pandemic-led uncertainties as well as the lapping of last year’s pandemic-led impacts. The company witnessed strength in both developed, and developing and emerging markets, driven by recovery. Both markets recorded double-digit volume growth in the quarter. It witnessed robust volume gains across China, Brazil and Nigeria, with volumes exceeding the 2019 levels. Meanwhile, the company continued to witness soft volume trends in India due to the ongoing impacts of the pandemic.

Category Cluster Performance: In the reported quarter, volume benefited from growth in trademark Coca-Cola; sparkling flavors; the nutrition, juice, dairy and plant-based beverages; and hydration, sports, coffee and tea categories.

Sparkling soft drinks’ unit case volume improved 14% (compared with 4% growth in the prior quarter), driven by robust gains in the United States, India and Brazil. Trademark Coca-Cola volumes were up 12% (compared with a 4% increase in the last reported quarter) on strong gains in Europe, Middle East & Africa, and Latin America. Moreover, the sparkling flavors category improved 18% on growth in Trademark Sprite and Trademark Fanta.

Volume for nutrition, juice, dairy and plant-based beverages was up 25%. The category primarily gained from growth in Minute Maid Pulpy in China, Mazaa in India, and Minute Maid and fairlife in North America.

Hydration, sports, coffee and tea category grew 25% in the second quarter. The company witnessed 12% growth in hydration on double-digit growth across all geographies. Sports drinks rose 35%, owing to gains in Powerade in North America. Tea volume accelerated 18% on growth witnessed in the United States, Japan and Brazil. The coffee business witnessed 78% growth on the reopening of the Costa retail outlets in the U.K. as the pandemic-led restrictions ease.

Segmental Details

Revenues rose 67% for EMEA, 41% for Latin America, 28% for North America, 27% for the Asia Pacific, 139% for Global Ventures and 38% for Bottling Investments segments.

Organic revenues improved 61% in EMEA, 39% in Latin America, 28% in North America, 27% in the Asia Pacific, 117% in Global Ventures and 29% in Bottling Investments.

Margins

Comparable currency-neutral operating income rose 46% year over year, driven by robust organic sales growth across all segments, offset by significantly higher marketing expenses compared with the prior year. In dollar terms, comparable operating income rose 48.9% to $3,209 million. Comparable operating margin expanded 170 basis points to 31.7%.

Guidance

Though uncertainties related to the coronavirus pandemic remain, the company raised its organic revenue and comparable earnings per share (EPS) growth guidance for 2021. It now estimates organic revenue growth of 12-14% for 2021 compared with high-single-digit growth mentioned earlier. It now estimates comparable EPS growth of 13-15% year over year versus a growth rate of high-single to low-double digits stated earlier. The company delivered comparable EPS of $1.95 in 2020.

Comparable net revenues are anticipated to be aided by a 1-2% currency tailwind, based on current rates and hedge positions. The company expects an underlying effective tax rate of 19.1% for 2021.

Comparable EPS is expected to include currency tailwinds of 2-3% compared with the previously mentioned 3-4% currency tailwinds.

The company now estimates generating free cash flow of at least $9 billion for 2021, with operating cash flow of at least $10.5 billion and capital expenditure of $1.5 billion. Earlier, it predicted free cash flow of at least $8.5 billion and operating cash flow of at least $10 billion.

For third-quarter 2021, it anticipates comparable net revenues to include currency tailwinds of 2% and comparable EPS to be aided by favorable currency movements of 3-4%, both based on current rates and hedge positions.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Coke has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Coke has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

KO – Coca Cola Icecek Sanayi As ADR's (COCAL) CEO Burak Basarir on Q2 2021 Results – Earnings Call Transcript

Written by admin on August 14, 2021. Posted in KO, Stock Report.

KO – Coca-Cola: The Recovery From Covid-19 Has Accelerated

Written by admin on July 25, 2021. Posted in KO, Stock Report.

The Coca-Cola Co. (

KO, Financial) reported earnings results last week that showed the company is back to where it was pre-pandemic. The company experienced tremendous headwinds during much of 2020 due to the Covid-19 pandemic, so demonstrating considerable growth from this period of time was likely a given going by Wall Street analysts’ estimates. Still, the company delivered results that were well ahead of what was expected.

Coca-Cola also raised its estimates for the remainder of the year. I added to my position in the company following the beat and raise earnings announcement. Let’s review in more detail why now may be a good time to buy the stock.

A rundown of earnings highlights

Coca-Cola reported second-quarter earnings results on July 21. Revenue surged almost 42% to $10.13 billion, which was $823.11 million better than what the market had anticipated. This was only the second quarter of at least $10 billion in revenue since 2017. Excluding a 5% headwind from currency exchange, net income of $2.9 billion, or 68 cents per share, compared favorably to net income of $1.8 billion, or 42 cents per share, in the prior year. Adjusted earnings per share was 12 cents better than expected.

Considering how weak the prior year’s second quarter was, analysts had high expectations for organic revenue growth, with consensus estimates coming in at 29.3%. Coca-Cola easily topped this as the company had organic revenue growth of 37%.

The company saw an increase in its market share of the nonalcoholic, ready-to-drink beverages as the company saw gains in both the at-home and away-from-home channels. The away-from-home channels were especially hit hard by Covid-19 as convenience store, restaurant and grocery store sales were very weak last year as consumer were largely required to stay home.

Concentrate sales were up 26% companywide, with all regions and business units posting at least 15% year-over-year growth. The Europe, Middle East and Africa region was the top performer with a 41% improvement in concentrate sales. Latin America was up 29%, North America grew 16% and Asia Pacific was higher by 15%. Price and mix added 11% to total revenue, with the EMEA and North America regions being the strongest performers.

Unit case volumes enjoyed robust demand as volumes were up 18%. Bottling investments had 25% increase due to strength in India and South Africa. EMEA led the way by region with a 21% gain. All other regions and businesses improved by at least a double-digit figure.

Looking at beverage types, sparkling soft drink volumes improved 14%, led by high double-digit gains in Sprite and Fanta. Top-selling global brand Coca-Cola grew 12%. The nutrition, juice, dairy and plant-based beverage category was higher by 25%, primarily due to increases in Minute Maid. Hydration, sports, coffee and tea were up 25%. Coffee was the real bright spot as volumes were higher by 78%, mostly as a result of the reopening of Costa retail stores in the U.S. Sports drinks also did well, growing 35% with volumes above what was seen in the same period of 2019. Hydration saw demand across the board geographically as unit cases grew 21%.

As a result of sales and market share gains, Coca-Cola experienced a 210-basis point expansion of its operating margin to 29.8%.

Coca-Cola’s balance sheet appears to be solid. The company ended the most recent quarter with $87.3 billion of total assets, $19.2 billion of current assets and $10.9 billion in cash, cash equivalents and short-term investments. Total liabilities numbered $68.1 billion, including $14.6 billion of current liabilities. Total debt is sizeable at $42.8 billion, but just $2.7 billion of debt matures within the next 12 months. The company also generated free cash flow of $5.1 billion in the first half of the year, a staggering $2.8 billion increase from the prior year.

On the strength of the most recent quarter, Coca-Cola lifted its guidance for 2021. The company now expects organic revenue growth of 12% to 14%, up from high single digits previously, and adjusted earnings per share growth of 13% to 15%, up from high single digits to low double digits previously.

Takeaways

While the most recent quarter was going up against greatly depressed figures, the results were good even against pre-pandemic numbers. Looking back at the second-quarter of 2019, revenue and net income were both up 1.3%. These are not exactly barn-burning growth rates, but the second quarter of 2021 does stand as Coca-Cola’s most successful quarter in a very long time.

Unit cases are also much more in line with 2019 levels as the loosening of some social distancing restrictions has seen an uptick in demand throughout Coca-Cola’s distribution channels. This combined with market share gains seen in the most recent quarter show that consumers continue to seek out the company’s products.

Organic growth also accelerated from the first quarter of the year to the high 30% range from 18% in the first quarter. Growth was broad based, with all parts of the company contributing to results. EMEA was the standout with organic growth of more than 60%. Latin America added a gain of nearly 40%, while North America and Asia Pacific were in the high 20% range.

Wide-ranging growth also applies to the Coca-Cola’s different beverage categories, with each up at least 14%. Some of this is due to the relaxing of social distancing restrictions in certain markets, but some products, such as sports drinks, are also ahead of where they were before the pandemic. And considering how entrenched trademark Coca-Cola is as the world’s top-selling carbonated beverage, a double-digit increase speaks to the brand’s demand amongst consumers.

Another positive sign is that Coca-Cola’s operating margin is within striking distance of its result in the second quarter of 2019. The most recent quarter’s 29.8% mark is just below the 29.9% figure in 2019. Year-to-date cash from operations ($5.5 billion versus $4.5 billion) also favors the latest quarter.

The company followed up an excellent quarter with an increase in its expectations for both organic revenue and adjusted earnings per share. This implies that leadership believes the results seen in the second quarter are at least somewhat sustainable through the end of the year. The comparisons will likely be more formidable for the second half of the year just because Coca-Cola saw improvements in its business over this same time period in 2020. The upwardly revised guidance supplies some confidence that the company will continue to do well even if the comparable quarters become slightly more difficult.

Valuation analysis

Coca-Cola’s stock does come at a premium to its valuation, at least on a historical basis. Using my July 22 purchase price of $56.46 and the new midpoint of expected earnings per share of $2.22, Coca-Cola has a forward price-earnings ratio of 25.4.

Shares have an average price-earnings ratio of just over 21 since 2011. Reverting to the mean valuation would result in a 17% decrease in share price.

However, using intrinsic value as calculated by GuruFocus, referred to as the GF Value, Coca-Cola doesn’t appear to be overtly expensive at all.

Coca-Cola has a GF Value of $53.28, equating to a price-to-GF Value of 1.06 from my purchase price. The stock earns a rating of fairly valued from GuruFocus.

Final thoughts

Coca-Cola faced an easy comparison to the same quarter a year ago, but still managed to see organic revenue and earnings per share figures that was far ahead of what analysts had expected. The company’s organic growth rate increased sequentially and market share was taken in multiple product categories. Coca-Cola saw strength in every business segment and region and raised its forecast for the year.

I have concentrated nearly all of my investments in dividend-paying stock,s and Coca-Cola has a lot to offer on this front. As I discussed previously, Coca-Cola has one of the longest dividend growth streaks in the marketplace. The stock also offers a dividend yield of nearly 3%, which is more than twice that of the average yield of S&P 500 index.

One of my principal investment strategies is to acquire stocks of companies that beat and raise revenue and earnings estimates. Given the quality of Coca-Cola’s most recent quarter, the raising of expectations for the rest of the year, the fact the company is recovering from the Covid-19 pandemic at a fast rate, the stock’s yield and the company’s status as a Dividend King, adding to my position made much sense from my perspective. I would be a buyer of the stock on any weakness as well.

KO – KO Stock: $59 Target From Jefferies

Written by admin on July 18, 2021. Posted in KO, Stock Report.

The shares of Coca-Cola Co (NYSE: KO) have received a price target of $59 from Jefferies. These are the details.

The shares of Coca-Cola Co (NYSE: KO) have received a price target increase from $57 to $59 by Jefferies. And Jefferies analyst Kevin Grundy is maintaining a “Hold” rating on the company shares.

Grundy raised his estimates on the company shares ahead of the second-quarter earnings.

This report is widely expected to detail a strong quarter with a likely upward revision to the company’s full-year 2021 guidance given read-throughs from Pepsi’s recent report along with trends in on-premise and foodservice in developing markets being stronger than expected.

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.

KO – Coca-Cola (KO) Gains As Market Dips: What You Should Know

Written by Zacks Equity Research on July 15, 2021. Posted in KO, Stock Report.

Coca-Cola (KO – Free Report) closed the most recent trading day at $56.44, moving +0.32% from the previous trading session. This change outpaced the S&P 500’s 0.33% loss on the day.

Heading into today, shares of the world’s largest beverage maker had gained 2.91% over the past month, outpacing the Consumer Staples sector’s loss of 2.37% and the S&P 500’s gain of 2.89% in that time.

KO will be looking to display strength as it nears its next earnings release, which is expected to be July 21, 2021. The company is expected to report EPS of $0.55, up 30.95% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $9.4 billion, up 31.53% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $2.19 per share and revenue of $37.14 billion, which would represent changes of +12.31% and +12.5%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for KO. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company’s business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. KO is currently sporting a Zacks Rank of #3 (Hold).

In terms of valuation, KO is currently trading at a Forward P/E ratio of 25.7. For comparison, its industry has an average Forward P/E of 23.5, which means KO is trading at a premium to the group.

Meanwhile, KO’s PEG ratio is currently 3.38. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. Beverages – Soft drinks stocks are, on average, holding a PEG ratio of 2.54 based on yesterday’s closing prices.

The Beverages – Soft drinks industry is part of the Consumer Staples sector. This industry currently has a Zacks Industry Rank of 209, which puts it in the bottom 18% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow KO in the coming trading sessions, be sure to utilize Zacks.com.

KO – Coca-Cola (KO) Stock Slips on Ronaldo's Act: Will It Bounce Back?

Written by Zacks Equity Research on June 17, 2021. Posted in KO, Stock Report.

Shares of The Coca-Cola Company (KO – Free Report) recently lost momentum, following the news about the soccer superstar, Cristiano Ronaldo, removing bottles of the carbonated drink from the table before the press conference at the Euro 2020. After moving the Coke bottles, Ronaldo held a bottle of water high to encourage people to drink water instead. The Portugal captain is known for being a health enthusiast.

However, the soccer star’s action had a greater implication on Coca-Cola’s market value, which lost approximately $4 billion following the press conference. The news sent shares of Coca-Cola down by 1.6% soon after the conference. Meanwhile, the stock closed down 1.3% yesterday. Notably, Coca-Cola is one of the official sponsors of the Euro 2020.

A spokesperson at the Euro 2020 responded to Ronaldo’s action, stating that players are offered water as well as Coca-Cola and Coca-Cola Zero Sugar at the press conference. However, everyone is entitled to their choice of drink.

In April, Coca-Cola noted that its global ready-to-drink market share started to improve due to the reopening of restaurants and movie theaters in major markets, including the United States and Europe. This is well reflected in the company’s significant share price growth, which has risen 13.5% since February. Overall, shares of Coca-Cola have increased 8.1% in the past three months compared with the industry’s growth of 6.8%.

Image Source: Zacks Investment Research

Notably, the Zacks Rank #3 (Hold) company’s beverage business significantly lost market share in 2020, following the onset of the pandemic.

In its last reported quarter’s earnings conference call, management stated that the volume trends in March 2021 marked the return to the pre-pandemic levels of March 2019, largely driven by strength in the Asia Pacific. Volume gains were driven by its trademark Coca-Cola, sparkling flavors, and the nutrition, juice, dairy and plant-based beverage categories. The sparkling soft drinks’ unit case volume improved 4% in first-quarter 2021, with Coca-Cola Zero Sugar improving 8%. Volume for nutrition, juice, dairy and plant-based beverages was up 3%.

The company’s sales benefited from underlying share gains in both at-home and away-from-home channels. For 2021, management estimates organic net sales growth in high-single digits.

Additionally, Coca-Cola has been witnessing a splurge in e-commerce, with the growth rate of the channel doubling in many countries. The company has been accelerating investments to expand presence in this channel from the pre-crisis levels. It has been digitizing the enterprise for several years but has accelerated the evolution into an organization that efficiently executes marketing, commercial, sales and distribution, both offline and online.

The company is strengthening consumer connections and further piloting numerous different digital-enabled initiatives through fulfillment methods (be it B2B to home or B2C platforms in many countries) to capture online demand for at-home consumption. For example, it continues to add outlets and expand its myCoke B2B platform to new markets. Also, the online-to-offline (O2O) partnerships with multiple food aggregators ensure beverage availability and visibility. The company’s focus on accelerating expansion in the digital channel is likely to be sustainable, positioning it for long-term growth.

Better-Ranked Stocks to Watch

The Boston Beer Company, Inc. (SAM – Free Report) has delivered a trailing four-quarter earnings surprise of 51.5%, on average. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Archer Daniels Midland Company (ADM – Free Report) , also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 6.2%.

Chewy Inc. (CHWY – Free Report) has a long-term earnings growth rate of 20%. It currently has a Zacks Rank #2.

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KO – Coca-Cola (KO) Stock Sinks As Market Gains: What You Should Know

Written by Zacks Equity Research on June 14, 2021. Posted in KO, Stock Report.

Coca-Cola (KO – Free Report) closed the most recent trading day at $55.55, moving -1.09% from the previous trading session. This change lagged the S&P 500’s 0.18% gain on the day.

Prior to today’s trading, shares of the world’s largest beverage maker had gained 2.61% over the past month. This has outpaced the Consumer Staples sector’s gain of 1.83% and the S&P 500’s gain of 2.43% in that time.

Investors will be hoping for strength from KO as it approaches its next earnings release. In that report, analysts expect KO to post earnings of $0.55 per share. This would mark year-over-year growth of 30.95%. Meanwhile, our latest consensus estimate is calling for revenue of $9.4 billion, up 31.53% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $2.19 per share and revenue of $37.14 billion, which would represent changes of +12.31% and +12.51%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for KO. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company’s business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.27% higher. KO is holding a Zacks Rank of #3 (Hold) right now.

Looking at its valuation, KO is holding a Forward P/E ratio of 25.66. Its industry sports an average Forward P/E of 23.44, so we one might conclude that KO is trading at a premium comparatively.

Investors should also note that KO has a PEG ratio of 3.38 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company’s expected earnings growth rate into account. KO’s industry had an average PEG ratio of 2.7 as of yesterday’s close.

The Beverages – Soft drinks industry is part of the Consumer Staples sector. This industry currently has a Zacks Industry Rank of 125, which puts it in the top 50% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.

Category: KO