Coca-Cola (KO) Management Meetings Touch on Alcohol and Inflation, BofA Securities Reiterates Buy

BofA Securities analyst Bryan Spillane reiterated a Buy rating and $70.00 price target on Coca-Cola (NYSE: KO) after hosting meetings with Chairman and CEO James Quincey that offered insights into inflation and alcohol infused beverages.

Regarding inflation, the analyst stated "KO’s direct exposure to raw material inflation accounts for ~25% of its cost of goods sold. That said the company is seeing inflation across other areas such as media/advertising and labor. Overall, the impact is manageable. Stripping out the negative impact from currencies and integration of Body Armor, gross margins were up 50bps in 1Q. Over time the goal is to at least hold margins or improve them over time."

On alcohol products, the analyst commented "KO is currently experimenting with different alcohol products in Brazil (pre-mixed cocktails), US/Europe (Hard Seltzers) and Low alcohol ready to drink (Japan). Attributes that generate interest in these products for KO outside the US are 1) they can be produced in the Coke system with a concentrate type model (e.g. KO is brand owner and sells flavorings) 2) ready to drink products can leverage Coke system distribution given its away from home strength and 3) offers an adjacent category with attractive margins. Company is still evaluating whether the opportunity is material enough for the Coke system to move forward."

For an analyst ratings summary and ratings history on Coca-Cola click here. For more ratings news on Coca-Cola click here.

Shares of Coca-Cola closed at $64.61 yesterday.

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