Category: KO

KO – Coca-Cola Earnings: What to Watch

Investors are hoping to hear good news from Coca-Cola (NYSE:KO) in just a few days. The beverage titan turned in an unusually weak performance for most of 2020 as the pandemic pressured demand for on-the-go drink purchases. But Coke’s management team responded with major strategic shifts, including a push into e-commerce in recent months.

CEO James Quincey and his team will likely highlight wins like those, along with popular innovative releases in niches like sparkling water, teas, and sodas, when the company reports fourth-quarter earnings results while issuing its forecast for the new fiscal year. Let’s take a closer look at the announcement set for Feb. 10.

A woman drinking soda from a straw.

Image source: Getty Images.

When the rebound happens

Wall Street is bracing for another weak sales outing because Coke is still hurting from reduced consumer mobility and a lack of crowded sports events and concerts. Sales in the prior quarter declined 6%, with volumes falling 4% compared to PepsiCo‘s (NASDAQ:PEP) 1% uptick. Coke’s business is more focused on away-from-home consumption, and it lacks Pepsi’s large food and snack segment.

KO Revenue (TTM) Chart

KO revenue (TTM) data by YCharts. TTM = trailing 12 months.

Those differences have created a big divergence between the two businesses during the pandemic, with Pepsi hardly losing a step even as Coke’s sales plummeted.

Investors are expecting to see another modest revenue decline in this report as sales fall 5%. Executives back in October warned investors to brace for sluggish short-term results as COVID-19 outbreaks threatened new mobility restrictions. We’ll find out this week how much of an impact that situation had on the company’s organic growth.

Getting more efficient

Coke can’t do anything about the timing of the pandemic’s end, but management has room to make improvements to the company’s finances. Cost cuts helped push operating margin higher last quarter despite the sales slump. Coke is trimming hundreds of underperforming brands, too, so that it can focus on popular products like sparkling waters and zero-sugar sodas.

The company is getting better at developing and releasing these products, and investors should see immediate benefits showing up in metrics like operating margin and strong cash flow. CFO John Murphy told investors recently, “While much has changed with the onset of the pandemic, our focus on converting top-line growth to maximize returns has not.”

Staying cautious

Coke won’t have a lot of certainty when it comments on 2021. Management declined to issue even a three-month outlook back in October, and the virus is still impacting economic trends around the world.

The good news is that Coke’s quarterly reports will get progressively easier from here. The fiscal first quarter showed the beginning of the pandemic’s impact as demand plunged in March and April. Those declines mean the company will certainly announce a return to global volume growth this year, even if the fiscal fourth quarter marked its fourth consecutive quarter of losses.

PepsiCo will announce its results a day after Coke, and the consumer staples giant is expected to report a solid 4% organic sales boost for the year while projecting more growth for 2021.

Coke’s rebound timing is less certain. Its more-focused portfolio means it will see a sharper rebound once consumer life gets back to normal. But it could be almost another year before those shifts allow the company to start setting sales and profit records again.

KO – Coca-Cola (KO) Expected to Beat Earnings Estimates: Should You Buy?

Wall Street expects a year-over-year decline in earnings on lower revenues when Coca-Cola (KO Free Report) reports results for the quarter ended December 2020. While this widely-known consensus outlook is important in gauging the company’s earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.

The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on February 10. On the other hand, if they miss, the stock may move lower.

While management’s discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it’s worth having a handicapping insight into the odds of a positive EPS surprise.

Zacks Consensus Estimate

This world’s largest beverage maker is expected to post quarterly earnings of $0.41 per share in its upcoming report, which represents a year-over-year change of -6.8%.

Revenues are expected to be $8.74 billion, down 3.6% from the year-ago quarter.

Estimate Revisions Trend

The consensus EPS estimate for the quarter has been revised 0.69% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.

Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change.

Price, Consensus and EPS Surprise

Earnings Whisper

Estimate revisions ahead of a company’s earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model — the Zacks Earnings ESP (Expected Surprise Prediction).

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.

Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model’s predictive power is significant for positive ESP readings only.

A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP.

Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How Have the Numbers Shaped Up for Coke?

For Coke, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company’s earnings prospects. This has resulted in an Earnings ESP of +0.35%.

On the other hand, the stock currently carries a Zacks Rank of #3.

So, this combination indicates that Coke will most likely beat the consensus EPS estimate.

Does Earnings Surprise History Hold Any Clue?

While calculating estimates for a company’s future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it’s worth taking a look at the surprise history for gauging its influence on the upcoming number.

For the last reported quarter, it was expected that Coke would post earnings of $0.45 per share when it actually produced earnings of $0.55, delivering a surprise of +22.22%.

Over the last four quarters, the company has beaten consensus EPS estimates four times.

Bottom Line

An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss.

That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it’s worth checking a company’s Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they’ve reported.

Coke appears a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release.

KO – Covid Slammed Coke Stock. Better Days Are Ahead.

Warren Buffett, chief executive officer of Berkshire Hathaway, drinks a Cherry Coca-Cola.

Daniel Acker/Bloomberg

With the year almost over, we’re taking a look at all 30 stocks in the Dow Jones Industrial Average, starting with the worst performers— Boeing and Walgreens Boots Alliance —and working our way up to the highest-flying stock in the benchmark— Apple. The ranking may shift before the close of 2020 trading, but the stories behind the stocks shouldn’t.

Enjoying an ice cold Coke at the movies, at a restaurant with friends, or while cheering your favorite sports team may be a habit for many. Unfortunately for the stock, the pandemic meant people weren’t doing any of those things this year, although 2021 looks brighter.

Coca-Cola (ticker: KO) is down about 6% in 2020 at recent check, putting it in the bottom half of the Dow in terms of year to date performance.

Coke had a good start to the year, but said in February that the virus would weigh on its earnings. It issued another warning in April, saying the worst was yet to come.

Even as more people stocked their pantries with Coke during lockdowns, that couldn’t make up for the lack of consumption at events and eateries. That business makes up about half of Coke’s sales. Indeed, rival PepsiCo (PEP) sees a more significant portion of sales from at-home consumption, which has helped the stock rise 6% this year.  

The picture began improving for Coke this summer. Its most recent earnings report in October included bright spots as well, such as a prediction for growth for key markets like China.

Certainly, a difficult few months remain ahead for Coke, but 2021 may be a better year. The company already announced plans to restructure and focus on higher-growth businesses and should benefit from improving living standards around the world and a weaker dollar.

Barron’s named Coke as one of the top 10 stocks for 2021.

Analysts are largely upbeat about Coke’s prospects too: 77% of the 22 tracked by FactSet rate it at Buy or the equivalent, while 23% are on the sidelines. There are no bearish calls on the Street, and the average analyst price target is $57.35.

Coke will report earnings in mid-February, and evidence of a continuing recovery from the pandemic could boost the shares.

Write to Teresa Rivas at teresa.rivas@barrons.com

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

Coca-Cola (KO Free Report) closed the most recent trading day at $53.08, moving +0.61% from the previous trading session. This change outpaced the S&P 500’s 0.08% gain on the day. Meanwhile, the Dow gained 0.38%, and the Nasdaq, a tech-heavy index, lost 0.29%.

Heading into today, shares of the world’s largest beverage maker had lost 0.86% over the past month, lagging the Consumer Staples sector’s gain of 2.91% and the S&P 500’s gain of 3.8% in that time.

KO will be looking to display strength as it nears its next earnings release. On that day, KO is projected to report earnings of $0.41 per share, which would represent a year-over-year decline of 6.82%. Our most recent consensus estimate is calling for quarterly revenue of $8.69 billion, down 4.21% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $1.89 per share and revenue of $33.08 billion, which would represent changes of -10.43% and -9.59%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for KO. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company’s business and profitability.

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 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 has moved 0.07% higher. KO is currently sporting a Zacks Rank of #3 (Hold).

Digging into valuation, KO currently has a Forward P/E ratio of 27.99. This valuation marks a premium compared to its industry’s average Forward P/E of 23.88.

Meanwhile, KO’s PEG ratio is currently 6.66. 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. The Beverages – Soft drinks industry currently had an average PEG ratio of 4.15 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 222, which puts it in the bottom 13% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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 to slash its global workforce by 2,200 jobs as COVID-19 accelerates restructuring

The Coca-Cola Company (NYSE: KO) said last week it will slash its global workforce by 2,200 jobs with more than half of them planned for the United States. The company attributed the move to business disruptions in recent months related to the ongoing Coronavirus pandemic that has so far infected more than 76 million people worldwide and caused a little under 1.7 million deaths. In an emailed statement, Coca-Cola said:

“The pandemic was not a cause for these changes, but it has been a catalyst for the company to move faster.”

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Coca-Cola offered voluntary layoffs to workers in August

Amidst a hit to its sales in recent month, Coca Cola had offered voluntary layoff packages in August to four thousand of its workers in Puerto Rico, Canada, and the United States. The American multinational, however, is yet to disclose how many of them accepted the package.

In a report published in October, Coca-Cola said its net income slid to £1.33 billion in the fiscal third quarter versus the year-ago figure of £1.98 billion, as the ongoing COVID-19 crisis weighed on demand. The U.S. company adopted DLT and Ethereum to improve its supply chain in August.

Coca-Cola closed almost flat on the weekly chart on Friday. At £39.71 per share, the Atlanta-based company’s shares are now 2.5% down year to date in the stock market after recovering from a sharply lower £27.78 per share in late March, when the impact of the pandemic was at its peak.

Coca-Cola didn’t give the timeline for the announced layoff

The U.S. beverage corporation refrained on Thursday from highlighting the timeline when the announced layoff will be implemented. According to Coca-Cola, its global workforce comprised of roughly 86,200 employees at the start of the year. 10,400 of these workers, as per the company, were based in the United States.

The world’s 3rd largest beverage company also highlighted in its announcement on Thursday that close to 500 jobs that are to be slashed as part of its restructuring will be in Atlanta Metropolitan Area – where it is headquartered. On Tuesday, Coca-Cola European partners invested in countertop dispensing machine company, Lavit.

Coca-Cola performed fairly upbeat in the stock market last year with an annual gain of a little under 20%. At the time of writing, it is valued at £170.78 billion and has a price to earnings ratio of 27.87.

KO – Coca-Cola (KO) Gains But Lags Market: What You Should Know

Coca-Cola (KO Free Report) closed at $53.28 in the latest trading session, marking a +0.41% move from the prior day. This change lagged the S&P 500’s 0.58% gain on the day. Meanwhile, the Dow gained 0.49%, and the Nasdaq, a tech-heavy index, added 0.84%.

Prior to today’s trading, shares of the world’s largest beverage maker had gained 0.86% over the past month. This has lagged the Consumer Staples sector’s gain of 1.51% and the S&P 500’s gain of 2.12% in that time.

Wall Street will be looking for positivity from KO as it approaches its next earnings report date. On that day, KO is projected to report earnings of $0.41 per share, which would represent a year-over-year decline of 6.82%. Our most recent consensus estimate is calling for quarterly revenue of $8.69 billion, down 4.21% from the year-ago period.

KO’s full-year Zacks Consensus Estimates are calling for earnings of $1.88 per share and revenue of $33.06 billion. These results would represent year-over-year changes of -10.9% and -9.66%, respectively.

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. As such, positive estimate revisions reflect analyst optimism about the company’s business and profitability.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. 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, 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. The Zacks Consensus EPS estimate remained stagnant within the past month. KO currently has a Zacks Rank of #3 (Hold).

Investors should also note KO’s current valuation metrics, including its Forward P/E ratio of 28.17. Its industry sports an average Forward P/E of 24.03, so we one might conclude that KO is trading at a premium comparatively.

Meanwhile, KO’s PEG ratio is currently 6.71. 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. KO’s industry had an average PEG ratio of 4.13 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 211, which puts it in the bottom 18% 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.

KO – A $120 Investment in Coca-Cola's IPO Would Be Worth This Much Money Now

The IPO of Coca-Cola (NYSE:KO) took place more than a century ago. The company issued 600,000 shares of publicly available stock in September 1919 at $40 per share, according to a company news release.

Coca-Cola had already evolved significantly since Atlanta pharmacist John Stith Pemberton invented the formula for the original carbonated beverage in 1886. However, few could probably imagine where Coca-Cola or its stock would go in the coming decades.

The value of Coca-Cola today

Consumers can now find Coca-Cola products in more than 200 countries. It has also become a beverage empire encompassing over 500 brands across numerous types of drinks, though it intends to reduce that number over the next few years.

Still, such a footprint means Coca-Cola stock, like most consumer staples stocks, tends not to draw as much attention as newer, higher-growth stocks.

Two people toasting using glasses filled with soda.

Image source: Getty Images.

Nonetheless, for investors who imagine the time horizon for owning a stock decades out, the returns look considerably more impressive. Throughout its history, Coca-Cola has experienced 11 stock splits. So one share sold in 1919 has become 9,216 shares today.

Hence, if an ancestor of yours had purchased three shares of Coca-Cola stock for $120 at the IPO and eventually handed over the split shares to you, just those 27,648 shares would now be worth more than $1.483 million.

The Coca-Cola dividend

The company also made its first dividend payment in 1920 and has made almost 400 consecutive quarterly dividend payments since then.

Today, the dividend payout stands at $1.64 per share. Multiply those 27,648 shares by the dividend and you have a yearly dividend income this past year of $45,342 to add to the share price value. At the current stock price, the dividend yields about 3.2%. To put that into perspective, the S&P 500 index average dividend yield is about 1.6%.

Though that yield sounds compelling for a new investor, the bulk of the benefit has accrued to those who held the stock long term. Coca-Cola implemented its 58th consecutive annual dividend increase in February. Only a handful of stocks have a longer track record of consecutive dividend increases than Coca-Cola. These stocks, as well as Coke, are known as Dividend Kings.

Admittedly, the payout has become a significant expense for the company. The dividend claimed about $3.5 billion of the company’s $5.5 billion in free cash flow in the most recent quarter.

Nonetheless, this makes the payout sustainable. More importantly, since breaking the long payout streak could undermine confidence in the stock, investors can probably expect another payout hike next year and in the years to come.

Warren Buffett and Coca-Cola

The payout, along with the overall value proposition, is what probably attracted Warren Buffett to the stock. His company, Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), made its first purchase of Coca-Cola stock in 1988.

Buffett would go on to invest about $1.3 billion in Coca-Cola. The company now holds 400 million shares, or 9.3% of Coca-Cola’s stock. That stake is worth approximately $20.6 billion today.

The stock has only risen by just over 60% over the last 10 years, significantly underperforming the S&P 500. Nonetheless, Buffett is probably happy with Coca-Cola’s performance in one critical respect.

KO Chart

KO data by YCharts

This year, his 400 million shares generated $656 million in dividends. This is more than a 50% return on his original investment, meaning he currently receives the money back on this investment (and then some) every two years without selling a single share!

The lesson of Coca-Cola stock

Indeed, most investors do not have a 100-year investment horizon. Even if they did, they should not expect one of today’s shares to split into more than 9,000 a century from now. Since Coca-Cola is now available in nearly all countries, driving growth has become a more difficult challenge.

Still, the fact that dividend returns are roughly double the S&P 500 average might attract new investors today.

Moreover, even if investors decide not to buy Coca-Cola stock, it offers one critical lesson. Investors like Buffett who find a solid company and hold on to that for decades could earn considerable rewards.

This is a huge incentive to ignore the day-to-day machinations of a stock. Instead, the largest rewards could come to stockholders who focus on long-term growth and quietly collect dividends.

KO – The Coca-Cola Company's (KO) Management Presents at Morgan Stanley Global Consumer & Retail Conference (Transcript)

The Coca-Cola Company (NYSE:KO) Morgan Stanley Global Consumer & Retail Conference December 3, 2020 2:00 PM ET

Company Participants

John Murphy – Chief Financial Officer

Conference Call Participants

Dara Mohsenian – Morgan Stanley

Dara Mohsenian

Good afternoon, everyone. I’m Dara Mohsenian, Morgan Stanley’s beverage, household products and food analyst. I’m very pleased to welcome Coca-Cola to Morgan Stanley’s Global Consumer and Retail Conference. Before we get started, I do have to note that there are important disclosures on Morgan Stanley’s website at www.morganstanley.com/researchdisclosures. And if you have any questions, feel free to reach out to your Morgan Stanley sales representative.

So joining us today from Coca-Cola, we have John Murphy, who’s Coca-Cola’s Chief Financial Officer. Clearly a very interesting time for Coke. The company was seeing a lot of traction in accelerating organic sales growth, and also generating greater cash flow productivity pre-COVID under strategic changes under a relatively new management team, including John. And since then has clearly seen a significant decline in away-from-home volume during COVID, but it’s implemented numerous plans, including a restructuring to adjust to the new environment.

So John, it’s great to have you here today and thanks so much for joining us.

John Murphy

Thanks, Dara. Nice to be with you.

Question-and-Answer Session

Q – Dara Mohsenian

So to start with, John, maybe we can talk a bit about the near-term business trends, COVID impacts around the world sort of walk around the world. On the Q3 call, you highlighted global volume trends improved from the 25% decline we saw in April to mid-single digits in July and August, and then further to a low-single digit decline in September and October with the away-from-home business improving sequentially during that period and driving that. But you mentioned that some of that on-premise recovery stalled in October, there are obviously some risks here in the winter months with further lockdown measures. So can you just take us through a bit of sort of the puts and takes as you look at the balance of the year and heading into 2021 on a regional basis and take us through a walk around the world?

John Murphy

Sure. Thanks. Let me start with where we left off on the Q3 call. As you said, we had seen the fourth quarter start sort of low-single digits and there has been a huge amount of change, material change throughout November on that either. Some ups and downs, as you would imagine around the world as different economies and different markets handle the ongoing impact of the pandemic. We still have a few weeks to ago. We’re still in the early part of December. And as you know, December is an important month for us given its Christmas season and the tremendous association there is around the world between Christmas and Coca-Cola. So still a little bit of ways to go.

As I’ve kind of go around the world, maybe we can start in Asia. We’ve continued to see China recover probably ahead of the rest of the world. The system in China is targeting to have growth numbers as we leave this year and go into next year, which is very encouraging. And not dissimilar to I think what we will see while the away-from-home is recovering, the recovery lies at-home in the case of China. In other parts of Asia, it’s a mixed bag. Not only have we had in Southeast Asia, the pandemic to deal with, there has been very unfavorable weather in the – during the typhoon season, affecting a couple of our larger markets, including the Philippines for a period. So that’s sort of an impact.

Japan, has been a challenging year in Japan. But I would expect Japan to see some improvements going into the first quarter of 2021. We go over to Europe, kind of again, some different pieces in Europe. Western Europe has seen, I would say the most headwinds in the last few weeks given the moves in a number of the key markets to address the surge that was experienced there. But all – in Central and Eastern Europe, it’s – we’ve seen the business holding up better there. And of course, in Europe we have our cost of business, which in the UK has been impacted in the course of the year. And as we go into again into the rest of the year, the December month is a big month for cost, and we will be looking to see how the UK manages through the next few weeks.

Coming across to the United States, if ever there was a mixed bag it’s here in terms of the way that different states are handling the virus. The at-home business has continued to be very robust, but for sure it does not make up for the impact we have had on the away-from-home and away-from-home over the last two or three weeks, I think has been a little softer. The good news, I think on many fronts is the fact that there is a vaccine in sight. And so the key question will be how long will it take for that to have a material impact on mobility and sort of the reopening of for us anyone of the away-from-home, the key away-from-home channels.

Latin America has demonstrated – our business has demonstrated a tremendous resiliency and particularly in our key markets, Brazil leading that notwithstanding that the pandemic itself has been sort of raging through a number of those markets. So all in all, sort of some puts and takes as I say, the first couple of months of the quarter pretty much in line with what we had signaled, we expected in the October call a few weeks left to go through the Christmas period. And as always, it’ll – I think it will be a dynamic period given what we’re seeing in a number of the key markets around the world.

Dara Mohsenian

Great. That’s helpful. And then maybe shifting from volume to price mix, clearly revenue growth management has been one of the pillars of the top line strategy under James over the last several years in the shift to smaller premium packages. You’ve also discussed an increased focus post-COVID on affordability, so particularly, probably in emerging markets. So as you look going forward with a less certain macro backdrop around COVID or post-COVID, how do you see that pricing strategy evolving? Is affordability more of a near-term focus? Or is there sort of more of a longer-term shift in strategy? And how do you think about the ability to obtain that price mix over time?

John Murphy

Yes. Well, in the very near-term as we saw in the last couple of quarters, there has been a pressure on the gross margin line. And so over the next one to two quarters, I would expect that to be there. Revenue growth management, I was talking to somebody earlier today, was actually born through a crisis in Latin America with the intention to be able to manage the exact equation that you’re just talking about provide absolute affordable price points to sustain the consumer base at the lower end of the socioeconomic scale, but by the same token, be able to get value from those who can afford it at the mid to higher end. And so that in essence is at the heart of the RGM equation.

So I’ve talked in the past, the current iteration of RGM that we call 2.0 has been very effective around the world in both developed and developing markets, allowing our system to really leverage the data analytics that are now available today to help develop the right, the optimal price packed architectures on a by channel basis in the various markets around the world. Implicit in the RGM equation is one’s ability to execute against the frame. It’s one thing to write down what it should be in order to make it happen on an outlet by outlet basis.

So I’m confident that the momentum that our bottling system has demonstrated over the last three or four years on a sustained basis and building the capabilities that you need to be able to execute the RGM strategy will continue and that will allow us to manage through over the next couple – say in the near-term, where we do, we will have some pressure on the gross margin line. But I think that there’s enough leavers within the RGM playbook to allow us to continue to have confidence in our ability to get back to the top end of the revenue line on the growth algorithm.

Dara Mohsenian

Okay. And then in August, you clearly announced a large business reorganization with a move to a network model, the reduction from 17 business units to 9 operating units, obviously workforce reductions, platform services, so a number of changes. What’s sort of the biggest opportunity in your mind emanating from the changes as you think about it? Is it higher top line growth? Is it productivity? Which is the most significant piece of the program in your mind? And also maybe just give us some background on how you came to the decision to pursue this type of approach and what gives you confidence that it will actually pay off.

John Murphy

Yes. So maybe if I can carve that up into a few parts, first of all, the biggest opportunity for me, if you remember back to our Cagney conversation, which seems forever ago. In February, we talked about the top line flywheel feeding into the bottom line flywheel. And the genesis and the idea behind these changes are to really make those works even more effectively together.

We had – in the beginning of 2019 had a number of conversations, James and Brian, and some of the members of the leadership team too, really take a step back and to challenge ourselves as how can we be more simpler ourselves to do business? How can we be more agile and be more nimble in the marketplace? And so at the root of the so-called network model there’s a few areas that I think are going to deliver the opportunity that has driven us to accelerating it through the COVID period.

The first one is the notion of being able to leverage scale, where it matters, and when it matters. And at the same time, stay intimate or local where it matters. I think some of our historic models have been a little bit one or the other, and it’s been difficult to get both to work in unison together.

So, when we think about the world of innovation, the notion of being able to drive a few big scalable initiatives and derive the value that is typically associated with scale, but by the same token say very, very local and intimate with an experimentation mindset, so that you can nurture and build new ideas and ultimately, help them scale is really – is really powerful and it’s powerful when it works. So, scale and intimacy balanced and working in unison is the first piece of it.

Number two is, we’ve – I’ve worked in the operating environment, the company all around the world as some of the other leaders. And I think one of our realizations is that over time, you end up having too much, too many hands at the tail, too much bureaucracy locally. And so a second piece of the equation is to have a much greater percentage of our resources in the field focused on frontline activities. And that’s been a big, that’s a big shift that is underway at the moment. So, we’ll have 70%, 75% of our resources in the operating units will be frontline focused and I think that’s going to be a really powerful ally for the – for our bottling partners.

The third area and these are not necessary in order of importance, Dara, I think, going to – the third area that’s in at the heart of this is a recognition that to get the top end of the revenue equation working well. We’ve got to continue to raise the bar on how we do marketing. How do we build brands? How do we engage in a relevant and effective manner with consumers all around the world? And how do we optimize the investments that we put into that? So, Manolo has been charged with us since he took over. He and I are partnering very effectively on the resource allocation, the efficiency, effectiveness side of that, but with this, we’ve also created new category leaders, who will have the stewardship responsibility on global brands to get the value that we believe. They have ahead of them working in partnership with our local operators.

I mentioned – number four, I mentioned the fact that our, if our field offices are becoming more frontline focused, we’re creating the platform services organization to be able to aggregate disparate services from around in the back office and indeed some of the front as well to be able to do them consistently and more efficiently.

And then secondly, within platform services is to – as to have wherewithal to really change the way we are able to leverage data. We’ve just – today, we’ve just appointed a new Chief Data Officer as part of that equation, that will, I think be a tremendous catalyst for the opportunity we have ahead in that space. Four flavors underpinning some of the workers is recognition that companies, as they get older, get a little bit fatter. And so there’s an opportunity to be leaner to be more efficient, to drive out some of the bureaucracy that builds up over time and that’s implicit in the work.

And those five elements are the underpinned, Dara, which is important, I think to recognize it, of having a right leadership model in place to allow it to get executed well. And so that’s the phase we’re in at the moment is we’ve just gone through a series of appointments around the world, very thoughtful process to put the right people into the key nodes, so to speak of the network so that it works in the way that we think it can and create a tremendous amount of value for us and for our bottling partners.

Dara Mohsenian

Right, okay. That’s helpful. And just one follow-up, in terms of how the operating units work with the category leads? How do you ensure that there’s no confusion in terms of responsibility, decision rights, et cetera? And I guess how is that structure sort of changed versus your prior approach?

John Murphy

Yes. So, I think it’s the – doubling somewhat in the details here on how it works. but the category leads will have primary focus on the global brands. So, if you go back to some work that we had talked about previously, we have moved the portfolio to be, I think, a leaner and a healthier portfolio shaping it with a – within that with segments that are global brands, regional and local. The category leads have the primary responsibility to steward, the global brands to steward they – the positioning – having a consistent brand positioning to drive the communication agenda on global brands. And that’s done very much in a collaborative sense. So, our Christmas ad campaign for Coke this year is a good example. Stewarded by the category lead, but working with a team of Coca-Cola experts located in the operations.

So, I’d say it’s, it’s a model we think has got tremendous potential. The operating unit will continue to be the primary P&L owner in the company. And the category leads will be held accountable to a set of metrics that are linked into the health of the brands that they own. So there’s – there will be complimentary, will there be tension? Of course, I would expect there to be lots of it, but what health attention to I think to drive the right mix of forward thinking, longer-term brand building work with what needs to happen on the frontline each and every day to drive the business.

Dara Mohsenian

Right, okay. And underpinning this new model is platform services. So, can you just explain the opportunity there with the platform service, platform and how it drives scale for your system going forward?

John Murphy

Yes. So, it’s the next evolution. We had started years back with a shared services model internally, that was primarily back office focused on transaction activity. More recently, we have outsourced some of that work to an organization, who can – for whom it is their front office, and therefore, to do it a hell of a lot better than we can. But the platform services place is a series of verticals within the organization, finance, marketing, procurement being three general services et cetera. And the opportunity here is to take work that historically has been done and if there’s 17 business units in 17 slightly different ways, and do it once and do it well, and be able to provide a superior service back into the operating units. So, it’s about service delivery of depending on what the area is, whether it’s marketing, finance, procurement at a higher level than historically.

And then the second part of the platform services equation is to be able to become more –much more data-driven enterprise. And for that to happen, its work that I firmly believe needs to be centralized, needs to have one set of owners. And in order to have the foundations in place for by you can then go on and leverage it for whatever the business needs are. And as I mentioned that the new Chief Data Officer will have a key role to play and in bringing that to life. We have had initial and primary focus on our own company, but we also see opportunities to underline on having a system-wide approach to this area, working with our bottlers.

Dara Mohsenian

Okay. And you’ve discussed your desire to emerge stronger post-COVID. In the last earnings call, you talked about getting to the high end of your long-term algorithm when you recover the earning space, that’s been pressured during COVID, which is 4% to 6% organic sales growth, 6% to 8% operating profit, 7% to 9% local currency earnings growth. What gives you confidence you can get to the high end of that range as you look out? And also specifically, maybe you can talk about share repurchases. They obviously haven’t been a factor in the last couple of years here particularly, with the recent tax court opinion we’ve seen and how sort of the balance sheet plays into it, particularly with the high dividend payout ratio we’re looking at here.

John Murphy

Okay, good. Let me start with why do I think it’s feasible, starts at the top line, and two ways to look it out. First of all, I think the industry itself continues – will continue to be very – a very attractive one. If we take 2020 out of the mix for a moment. the industry growth has been very consistent at around 4% and when you look at the drivers of industry growth population, the socioeconomic status of the population, and one’s ability to access that population. those drivers continue to be very much in favor of an industry like beverages. and so we think that the industry will continue to grow at that at those rates. So that’s a good starting point.

Secondly, as we continue to, I think, improve our own capabilities to be a formidable competitor around the world, we think that we should look for a higher level of growth than just the average. And so I’m confident that with the work that we have underway and the execution of that, while going into 2021 and beyond that the top end is very achievable. And the drivers of that will be that top – that flywheel that we have talked about before is starting up with great brands. And so shaping the growth portfolio that we think is right for the future is step number one, putting into place these category leaders to really have the accountability to steward the global brands.

And then our operating leaders to have to be accountable to winning locally, I think is a tremendous formula for us to be able to drive the brand piece of the equation, the execution piece of the equation, and then working very closely with our bottlers, the RGM piece, as I mentioned earlier, I think has got a lot of runway ahead. And then supporting all of that is the world of innovation whether it’s product innovation to support the ongoing attractiveness of brands and relevance package innovation to support the RGM agenda communication innovation, et cetera.

So, I think there’s a lot of really interesting stuff we have in the pipeline to be confident that flywheel can work to deliver the top end on the revenue line. as you go into, then converting that into the bottom line that we need. In the near-term, yes, you are right. The share purchases have not been priority for the last year or so and I think in the near-term, will not be you mentioned that the tax – the effective tax rate is clearly, an important part of the equation.

We did have a judgment recently and we were disappointed in that and we’ll be continuing to vigorously defend our position. We’ve got a lot of work underway to reflect on that judgment and be ready with next steps. We talk more about that in coming weeks. And yet, when I take – when I zoom up and take a step back, and look at the world post-pandemic, we think that we have the levers in place to be confident with the algorithm.

Dara Mohsenian

Okay. And maybe, let’s shift a little to the margin side of that. So first, marketing, obviously, it’s going to be down meaningfully this year as a result of the pandemic. But you’ve talked a lot about increasing the marketing effectiveness, you mentioned it earlier and you talked about on the last earnings call, sort of doing more with the same, or even potentially, doing the same with, with less. So, can you just elaborate on your thought process around a level of marketing spend?

first of all, how do you decide on that as we move into 2021 and sort of the pace of the recovery? but secondarily, might there be a chance to have lower spend in the industry coming out of all this as you do potentially realize that greater effectiveness, or maybe, some of these cutbacks during the pandemic, you’ve realized there are certain areas that weren’t as efficient as you otherwise might have thought.

John Murphy

Yes. A huge area that I’m working very closely with Manolo on the year that we’ve just gone through has been a catalyst, I’d say for this work to get to where it has so far. It was on the agenda towards the end of last year as we really started looking at the future role of marketing of innovation. how we have overtime built up our resource allocation models. many companies, I think, what happens is that your budget process only really allows you to play on the margins and rarely to, in my knowledge, and there may be other companies out there, I’m not that familiar with are in a position to make material changes on how they, where they choose to put their resources on that year-on-year basis.

And so, this year has been an opportunity – a unique opportunity to be able to take that step back and given the significant amount of cutbacks that we implemented in the second quarter, particularly to allow us in a non-normal environment to relook at our whole resource allocation model number one. number two, as part of that, it’s also – when times are tough is when you get you inspect very deeply everything that you’re doing. And so we believe that there’s a tremendous opportunity over the next, I would say, 18 months or so to deliver against that formula have been able to do the same with less as a first step and the delta there is going to allow us, I think, to reinvest intelligently, where the markets need us and/or be able to take some of that down to the bottom line.

We have, gosh, I can’t, we have, again, eight or nine verticals in motion at the moment spanning all aspects of how we do marketing that I’m confident we’ll be able to deliver significant benefits for us. And then as I said, in hand-in-hand with that is the right conversation say, well, what is the right amount of marketing that the market needs versus how much am I spending versus last year? How much I’m spending versus last year to me is become a less relevant measure. And it’s more importantly to be activity based and to be able to demonstrate through that avenue as to what a market or what a brand needs, and that’s what we’re going to at the moment. And actually I’m pretty excited about where is all heading.

Dara Mohsenian

Right. Okay. That’s a good segue in a market share. Obviously, markets tied into that as you think about share of voice in your categories, ROI, you’re realizing around marketing, can you take us through the market share environment at this point? I’d argue your trends have held up pretty well considering some of the channel mix issues you have when you look at sort of the underlying market share dynamics. So, I’d love to get an update around market share among your major brands and categories, and where you guys stand on that front and how they’re doing in terms of marketing?

John Murphy

So, it’s – I can tell you a great story, when you get into the weeds and you said there’s pockets, where we’re doing really well and areas where we have opportunity. when you compare it year-on-year, the biggest variable in the equation is the channel dynamics. So, there is a channel dynamic that has been a headwind for us that I would expect to reverse in particularly in the – starting in the middle of next year. So, we’re not ignoring it and we’re not being flippant about it. We’re conscious that it’s there, or we believe that it’s a mathematical equation that has gone against us for reasons that we know. we think the away-from-home channel is going to come back or even the subchannels within the away-from-home will – are going to come back and we have an opportunity to come back strong.

What’s been interesting is the – is for the channels that are open, we’ve seen or working with our bottlers, we’ve seen in many markets, a lot of progress in, let’s say, in the supermarket channels in many markets, where we may not have been as strong. We’ve seen a lot of progress there; because that’s a place you have to play. You can play the hardest in the course of the pandemic. And so we’re seeing good momentum in some of the channels that we had not been doing as well. but on the flip side, there are areas it’s important to get underneath the details and be clear as to what is a – what is the issue relative to sort of year-on-year, where are we doing well apples-to-apples, where are we not doing well?

And so, for example, in the U.S. and in some of the non-Cola flavors area, we have lost some ground. The team is very focused on that, and we think we will have a very good plan to address that going into next year. So, market share, Dara, in my experience working in the operating, you’ve got to get into the deep – into a very granular understanding of by channel, by category, by brand and then understand what are the – what are the root causes of either share gains or share losses? Is this something we’re doing? Is this something that the competitor is doing or is the combination of one versus the other, and then work your way through that granular picture.

And when you do, it normally – the market share performance, normally lags the actual work that gets done. It just takes a little bit of time. but overall, I think we – the numbers show, as you said, that shows with some declines, primarily channel mix driven. But overall, I think going into 2021, we feel that we’ll get back onto the – into the green box again. And also use the time to address some of the areas of weakness that we know we have relative to competition.

Dara Mohsenian

Right. Okay. That’s helpful. And then moving to your bottling network, we’ve obviously seen a large transaction here recently, proposed transaction with CCP and Amatil. Why does a combination of non-contiguous partners make sense in this case? How do you think about sort of what size you’d like bothers to be scaled size around the world, is the aspiration fewer larger bottlers? Is that a big focus on – from your part? And also then secondarily, you’ve clearly got some bottling assets still under your ownership, the Philippines, CCPA even became the past, you consider refranchising them. So, is consolidation a focus in this environment for coke? How do we think about it in this environment also?

John Murphy

Yes. let me start, if you take big picture over the last number of years, we’ve gone from having more, to having less, that’s been a trend and there’s many benefits associated with that. And I think that you’ll probably see over the coming three or four years, more of that happening in select – in selective places around the world. As you said, the Amatil European partners’ transaction is currently a proposed transaction. So, I won’t dwell too much on the transaction itself, but as you think about the different types of deals that get done, the more normal one is when you’ve got one barter purchasing another in contiguous territory is to get supply chain synergies of scale and efficiencies.

And in this case, the synergies will come from the revenue, from the innovation space. And when you look at the – when I look at the way in which European partners have performed since they’ve reformed and then underneath that, the capability of the organization, the ethos of the organization, the sort of the quality of the ownership, there’s lots of factors that go into any assessment. We’re shareholders in both companies. We support – we think it’s an opportunity that longer-term has got potential. But I think it’s important to say that there’s, no – we don’t have a formula, we kind of tick the box on it, it is somewhat case-by-case against some criteria that we would, that we always want to see in the equation. And we’re shareholders in both, we are supportive of both, both sets of shareholders can reach a positive outcome.

With respect to Bottling Investments Group, absolutely there’s no real change in our position. We still want to ultimately become a very small barter and move towards our asset-light model and focus our organization’s energy and resources on the brand building and on the innovation space, because that’s what we think we’re best at. And that’s what we think we can add the most value to the system. But, as I’ve said before, you’ve experienced in the past too, is you can’t be too flippant on who on the refranchising process and just give it to anybody. And so we’re in the midst of a number of conversations at the moment. And I would expect us to make progress in the number of the BIG territories, Bottling Investments Group territories over the next couple of years.

Dara Mohsenian

Great. That’s helpful. And then maybe we can move back to the margin front. Obviously a lot of different impacts here, right. We talked about marketing earlier and how there may be efficiencies there. You’ve got productivity under this restructuring that you’ve announced, there’s channel mix shifts, right. So as we look out assuming a top-line recovery, assuming sort of a full top-line recovery and you get back to that 2019 base, I guess, how should we think about margins? It seems like there might be opportunities for higher margins emerging from all of this, with the productivity post-COVID and potentially more effectiveness in terms of marketing and other areas. Is that the right way to think about things? Or how do you sort of think about it longer term in a couple of years out?

John Murphy

Yes. Like I’m kind of anchored in the commitment we have embedded in the long-term growth model, like there is margin expansion embedded in there. I think I’ve mentioned that, I like to think that we have levers and it’s situational at times as to which lever you deploy at which time, and which has got most impact at which time. I think that’s the art of management of being able to leverage these levers, whether it’s on the revenue line through premiumization or better innovation, or better pack architectures of whether it’s on the cost line through better formulas, managing our cost base, cost of goods base. And obviously right down through into both – into the SG&A line.

So I think, where I would anchor people is to – is that we have implicit in our growth model margin expansion over time. And year-on-year, it’s going to not be a straight line, but I believe that there is enough levers at our disposal to be able to deliver on what’s in the long-term model.

Dara Mohsenian

Okay. That’s helpful. And then the payout ratio has certainly moved up here the dividend payout ratio. How do you think about that conceptually is sort of the dividend commitment, a long-term commitment to shareholders, and you’re not too worried about a couple of years of cyclically depressed earnings around the pandemic or might there be more of a EBIT to generate some balance sheet flexibility? How do you just think through that, conceptually?

John Murphy

Yes, I think it’s – yes, it’s a very dynamic area with a number of pieces connected. We have talked to over the last two or three quarters, because I know it’s a topic that is very important to many as to what is our approach, particularly with the dividend. And so again, I think we’ve – you got to take a longer term view on policy around items such as dividend, your broader capital allocation agendum. And so we believe that the business can generate sufficient cash to support the dividend and to support the investment that we need in the business in the near-term. Is it where we would want it to be ideally? No, I think this year has for sure set us back, set us back a little from the progress we were making.

But it is an area like ultimately you have to deliver on – you have to be able to deliver the ongoing results of the business and that’s a huge reason that we have been, so I think focused on the emerging stronger agenda is to be able to get the business back humming as quickly as we can and leave the pandemic in the rear view mirror. So as we speak, we continue to believe that we can navigate our way through the next couple of years, not at the payout levels that we have established longer-term, what we think we can do and still invest in the business as the business needs.

We have stated that M&A will take a back seat for the time being. And that’s all, it’s got the caveat of. You’ve got to stay a little bit opportunistic too, but right now it’s not a huge priority. And as I mentioned in the earlier question, the near-term share repurchasing will take the back seat also.

Dara Mohsenian

Right. Okay. And then maybe we can end on the innovation front. You’ve talked about sort of moving to fewer, but larger type of projects, not having as much of a tail around innovation. What gives you confidence that approach will pay-off? How should we think about the level of innovation contribution to topline in light of that in 2021 and beyond, versus the last few years?

John Murphy

Yes, I think there’s two parts I’d like to just qualify what you said. I think there’s two parts to say. The first part is the notion that fewer more scalable initiatives can ultimately create more value. And I firmly believe that is the case.

But there’s a second component that sometimes gets forgotten. And that is you’ve got to continue to experiment and explore in an intelligent fashion locally. What we have, I think been able to do, again as using this year as a catalyst, because the work had already had started was, it’s important I think to do a spring cleaning every so often, let’s put it that way. We all have our garages and they all get over time they get full of junk and all of a sudden you can’t move. Well, that’s a little bit like, I think what happens in the innovation pipeline, it sort of almost creeps up on you.

And so this year has been a year to do a spring cleaning, get absolutely clear as to what initiatives that we need to be driving to, to be able to scale and deliver the value. But by the same token then create a space that allows us to explore and experiment more successfully. Just exploration for the sake of being able to say, there’s not a great game to be in. And when you look at the rate of success in the industry, it’s – there’s I think less than 3% or 4% of innovations actually last more than three years. So the success rate is not very high and so I think being smarter and having a higher bar as to what goes into the market makes sense. But you got to continue to be willing to explore and experiment while you drive and focus on the bigger players that can help fuel the overall growth equation in the near-term.

Dara Mohsenian

All right. Well, that’s very helpful John. We really appreciate your time and we appreciate you being here. This was a very informative. So thanks for being with us.

John Murphy

Thank you, Dara. Talk to you soon. Bye-Bye.

Dara Mohsenian

Great. Thanks.

KO – The Coke will be just fine

The Coke will be just fine

In EMEA markets, the company saw a 16% drop in operating revenues. Emerging and developing markets performed better, compared to the developed markets, where the sales declined

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Valdas S. London based head of technology during the day, writer at night. Valdas writes about finance, economy, and technology.

2020-11-29 17:18


Even though Christmas is around the corner, this year it might not be so merry for The Coca-Cola Company ($52.7|-0.44%). The company is experiencing global challenges ranging from the Covid-19 pandemic to currency fluctuations and changing consumer attitudes to its products.

The global span has many benefits when it comes to operational efficiencies and potential revenues. Still, it also becomes a global weakness when the entire world is affected by the pandemic. Can the soft drinks giant change its fortunes and enter the year 2021 with untapped opportunities and growth targets that it missed in 2020?

This year has been challenging, but not catastrophic for the company, taking into consideration how the pandemic affected Coke’s markets. The pandemic itself was only a part of the equation of challenges Coca-Cola had to deal with this years.

Latin America showed the largest drop in revenue compared to other major markets. Even though the comparable operating income in the region grew by 12%, mainly due to cost optimizations, currency fluctuations negatively offset it and resulted in 15% lower revenues in nine months ending September 25, 2020.

In EMEA markets, the company saw a 16% drop in operating revenues. Emerging and developing markets performed better, compared to the developed markets, where the sales declined. Despite the ongoing challenges, The Coca-Cola increased its share in NARTD (Non-alcoholic ready to drink) segment.

North America, the company’s largest market, saw the smallest decline with the operating income dropping by 4% this year. Weak performance in fountain segment partially offset by much more robust performance in premium product categories. The company’s NARTD share shrank mainly due to its substantial exposure to non-home channels, that were affected by the pandemic related restriction on trading.

So why despite all the bad news in 2020, the next year can bring much better results for the company? Firstly, the demand for its products is still there. While there were some downward adjustments in the demand in specific product categories, ultimately people still want Coke and other brands in the company’s portfolio.

The Coca-Cola Company played the long game investing and expanding its portfolio. It allowed such necessary levels of diversification, especially knowing the changing consumer sentiment towards sugary drinks, to which the company has offering ranging from non-sugary versions to much healthier brands altogether.   

It also has the necessary financial and marketing resources to deploy towards the markets if necessary. Its relationships with the retail networks lend itself to almost immediate recovery in sales as soon as lockdowns and restrictions to hospitality businesses are allowed to trade freely.

The company’s global ventures division, where coffee chain Costa is the main component, is much likely to survive adverse trading conditions and come out in good shape, compared to smaller chains and independent cafes.

The Covid-19 vaccination will likely to start still this year. It may result in fewer restrictions on trade across all sectors; therefore, the company is very likely to experience ‘celebratory success’, as optimistic outlooks can have a strong positive effect on its bottom line. It is also very likely that the company may acquire smaller competitors, as the price pressure on stocks is much greater for smaller producers.


Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.