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.

Will The Coca Cola Company (KO) Have a Fizzy or Flat 2013?

Page 1 of 2

Few companies are as globally known as The Coca Cola Company (NYSE:KO), the world’s largest beverage company. Few stocks are also as trusted as Coca-Cola, which has generated steady growth and income for conservative investors over the past decade. However, Coca-Cola’s fourth quarter results have some investors doubting the soft drink giant’s ability to continue expanding overseas. Is Coca-Cola still a fizzy investment, or has this stock gone flat?

The Coca-Cola Company (NYSE:KO)

The Fizzy Fundamentals

Before we analyze Coca-Cola’s fourth quarter earnings, we should first compare its fundamentals against two other industry peers – PepsiCo (NYSE:PEP) and Dr Pepper Snapple Group Inc. (NYSE:DPS).

Forward P/E 5-year PEG Price to Sales (ttm) Return on Equity
Profit Margin Debt to Equity
Coca-Cola 17.29 2.36 3.64 26.42% 18.48% 97.47
PepsiCo, Inc. 16.40 4.57 1.70 26.10% 9.03% 129.46
Dr Pepper Snapple 14.15 2.26 1.58 27.33% 10.47% 119.33
Advantage Dr. Pepper Dr. Pepper Dr. Pepper PepsiCo Coca-Cola Coca-Cola

Source: Yahoo Finance

Dr. Pepper Snapple wins in every growth metric. However, this is also because it is a much smaller company, with a market cap of $9 billion compared to Coca-Cola’s $168 billion and PepsiCo’s $112 billion. Coca-Cola comes out on top in two important categories – lower debt and higher profit margins. Both will be extremely important for balancing the company’s overseas expansion with unstable commodity prices.

Let’s also chart Coca-Cola’s top and bottom line performance against PepsiCo and Dr. Pepper Snapple over the past three years.

KO Revenue TTM data by YCharts

Coca-Cola’s revenue growth is notably outpacing its earnings growth. Although Coca-Cola is still growing its bottom line at a healthy rate, the divergence of PepsiCo’s top and bottom lines should serve as a cautionary tale for Coca-Cola shareholders. Meanwhile, Dr. Pepper has grown its bottom line faster than its top line – a healthy indicator that its margins are still kept in check.

Lastly, we should compare the operating margins of these three companies over the same period.

KO Operating Margin TTM data by YCharts

Coca-Cola’s margin growth is the healthiest, despite its wide exposure to global markets.

Based on pure fundamental growth, Coca-Cola is a rock solid stock that trades at a slight premium to its peers but also has the margin and revenue growth to back it up.

The Flat Fourth Quarter Earnings

So if Coca-Cola’s fundamentals are so stable, why are investors worried? Let’s take a look at the key numbers from its fourth quarter earnings.

Coca-Cola’s top line grew 3.8% to $11.46 billion – or 5% excluding currency impacts. Meanwhile, its earnings rose 12.65% to $1.87 billion, or 41 cents per share. Excluding one-time charges, the company earned 45 cents per share.

While earnings topped the Thomson Reuters’ forecast of 44 cents per share, revenue missed the forecast of $11.53 billion. Gross margin also dipped from 60.1% to 59.6%.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!