Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

PepsiCo, Inc. (PEP), Dr Pepper Snapple Group Inc. (DPS): Here’s How This Beverage Giant Is Here For Good

Page 1 of 2

PepsiCo, Inc. (NYSE:PEP)Headquartered in Atlanta, Georgia, the American beverage corporation, The Coca-Cola Company (NYSE:KO), has more than 500 brands across 200 countries. On April 16, the company released its earnings for the first quarter of 2013. As the company beat its estimates, its share price jumped by more than 5%. Now, the question is, will the company keep on doing wonders in the future as well?

Quarterly earnings

In 1Q13, Coca-Cola posted earnings of $0.46 per share, compared to analysts’ estimates of $0.44 per share. However, net income went down to $1.75 billion, or $0.39 per share, versus $2.05 billion or $0.45 per share in the same quarter last year. This was expected as 1Q13 had two fewer selling days in it.

Sales volume grew 3% for The Coca-Cola Company (NYSE:KO) in the Americas and 5% in for Coca-Cola internationally. The company reported 3% growth in Germany, 1% in North America and Japan. Europe remained flat, but improved substantially from the fourth quarter of 2012. As far as emerging markets were concerned, Coca-Cola was up 18% in Thailand, 8% in India and Russia, and 3% in Brazil and Mexico. Chinese business grew 1% for the quarter.

Sparkling beverages

The Coca-Cola Company (NYSE:KO)’s sparkling beverages’ volume grew 3% in the first quarter. The new marketing campaign “Crazy for Good” showed a lot of promise around the world by enhancing Coke’s brand image. Global brand Coca-Cola grew 3% for the quarter, fueled by 38% growth in Thailand and 30% in India. Fanta was up 6%, whereas Sprite’s volume increased by 5%.

Still beverages

In the case of still beverages, the company’s volume grew 6% in the quarter, helped by ready-to-drink tea, juices, energy drinks, sports drinks and packaged water. Ready-to-drink tea volume rose double digits, a result of high sales volume for brands like Gold Peak, Honest Tea, Ayataka green tea, and Fuze tea. Juices and energy drinks were up 9% for the quarter, while packaged water showed a growth of 1%.

Valuation

The Coca-Cola Company (NYSE:KO) is trading at a forward P/E (1yr) of 18.26 times, and has a PEG of 2.14. Adding a dividend yield of 2.60% in its PEG gives us a PEGY of 1.7. Using industry’s forward P/E (1yr) of 17.4, I can value Coca-Cola. However, as the company is all set to outperform its peers this year, I would value it using a premium of 20%. Hence, a forward P/E (1yr) of 20.8 times would be used for its valuation.

PepsiCo, Inc. (PEP), Dr Pepper Snapple Group Inc. (DPS): Here's How This Beverage Giant Is Here For Good

According to high estimates, Coca-Cola’s target price comes out to be $46. This means that it is undervalued by almost 10%. Adding a dividend yield of 2.60% gives a total return of more than 12%. This makes Coca-Cola Company (NYSE:KO) one of the top buys in its industry.

Page 1 of 2
Loading Comments...