Coca-Cola (KO) is Poised to Pop with Focus on Organic Growth - Barron's
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Not like investors need a heads-up on why they should purchase Coca-Cola (NYSE: KO), but here's a quick review anyway.
Shares are higher following a late Wednesday Barron's article, which takes an interesting spin on the beverage giant. First, it's not a beverage giant; it's a marketing company.
The Barron's notes -- unscientifically -- that while there are some customers worldwide who prefer the taste of Coca-Cola over that of Pepsi (NYSE: PEP), most consumers couldn't give a hoot which cola brand they're handed to gulp down. That said, Coca-Cola rolls-out ad campaigns regularly, generally sticking with ones that work over the long haul (polar bears drink cola now? We thought they were strictly meat-a-tarians. Er, pengui-tarians, as it turns out.)
Coca-Cola has performed well in 2012 thus far with shares outpacing the S&P 500 by 1 point or so. Barron's suggests the sluggish move higher could hint at more upside as fundamentals continue to show improvement.
In its first-quarter, Coca-Cola said case volume rose 5 percent while net income popped 6 percent. The company even boasts the number one and two soft drinks in the U.S. with it's flagship Coca-Cola and Diet Coke offerings.
Looking to 2013 gives investors another reason to be thirsty: earnings are expected to grow 10 percent, outpacing rivals PepsiCo. and Dr Pepper (NYSE: DPS).
In addition to just completing a cost-cutting effort, Coca-Cola is undertaking another. The second push would amount to $650 million in annual savings by 2015, according to one Wells Fargo analyst.
The jump in earnings might garner Coca-Cola a price-to-earnings ratio of 18 times, which is in-line with historic levels. Recent share movement has Coca-Cola closer to a 16 times multiple for 2013 expectations. Given the expected two-point increase, Coca-Cola stock might move to $80 per share or more. Though that's only 6 percent of upside from today's levels, a move of 7 to 8 percent would be both possible and very welcome by investors.
That said, investors would be paid a little for the wait. Coca-Cola generally boosts it's dividend in March, with a 3 cents per share raise given over the last two years. Currently, Coca-Cola doles out $2.04 annually for a yield of 2.7 percent. Another 12 cent annual boost would keep Coca-Cola's yield constant should shares hit $80.
An overhang Barron's points out is investor fear that management might make an acquisition to juice growth. Last month, rumors surrounded a potential deal between Coca-Cola and energy beverage giant Monster (Nasdaq: MNST). Coca-Cola since denied reports, leading many to believe Coca-Cola might take the organic growth route instead.
But, with more than 500 brands under its belt, Coca-Cola investors need to fear not. As a foremost leader in brand marketing, Coca-Cola only has to aim it's gun...then fire.
Profits should rain down shortly thereafter.
Now, if they could just figure out how to get giraffes drinking bottled water worked in there somehow...
Shares are 1.1 percent better on the session Thursday.
Shares are higher following a late Wednesday Barron's article, which takes an interesting spin on the beverage giant. First, it's not a beverage giant; it's a marketing company.
The Barron's notes -- unscientifically -- that while there are some customers worldwide who prefer the taste of Coca-Cola over that of Pepsi (NYSE: PEP), most consumers couldn't give a hoot which cola brand they're handed to gulp down. That said, Coca-Cola rolls-out ad campaigns regularly, generally sticking with ones that work over the long haul (polar bears drink cola now? We thought they were strictly meat-a-tarians. Er, pengui-tarians, as it turns out.)
Coca-Cola has performed well in 2012 thus far with shares outpacing the S&P 500 by 1 point or so. Barron's suggests the sluggish move higher could hint at more upside as fundamentals continue to show improvement.
In its first-quarter, Coca-Cola said case volume rose 5 percent while net income popped 6 percent. The company even boasts the number one and two soft drinks in the U.S. with it's flagship Coca-Cola and Diet Coke offerings.
Looking to 2013 gives investors another reason to be thirsty: earnings are expected to grow 10 percent, outpacing rivals PepsiCo. and Dr Pepper (NYSE: DPS).
In addition to just completing a cost-cutting effort, Coca-Cola is undertaking another. The second push would amount to $650 million in annual savings by 2015, according to one Wells Fargo analyst.
The jump in earnings might garner Coca-Cola a price-to-earnings ratio of 18 times, which is in-line with historic levels. Recent share movement has Coca-Cola closer to a 16 times multiple for 2013 expectations. Given the expected two-point increase, Coca-Cola stock might move to $80 per share or more. Though that's only 6 percent of upside from today's levels, a move of 7 to 8 percent would be both possible and very welcome by investors.
That said, investors would be paid a little for the wait. Coca-Cola generally boosts it's dividend in March, with a 3 cents per share raise given over the last two years. Currently, Coca-Cola doles out $2.04 annually for a yield of 2.7 percent. Another 12 cent annual boost would keep Coca-Cola's yield constant should shares hit $80.
An overhang Barron's points out is investor fear that management might make an acquisition to juice growth. Last month, rumors surrounded a potential deal between Coca-Cola and energy beverage giant Monster (Nasdaq: MNST). Coca-Cola since denied reports, leading many to believe Coca-Cola might take the organic growth route instead.
But, with more than 500 brands under its belt, Coca-Cola investors need to fear not. As a foremost leader in brand marketing, Coca-Cola only has to aim it's gun...then fire.
Profits should rain down shortly thereafter.
Now, if they could just figure out how to get giraffes drinking bottled water worked in there somehow...
Shares are 1.1 percent better on the session Thursday.
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