Coca-Cola Investment AnalysisCoca-Cola Investment AnalysisIntroductionCoca-Cola’s earnings and growth are expected to remain positive. This is based on the quantitative and qualitative estimations by the chosen investment advisors, along with my own calculations. The investment advisors expect Coke’s operating income, net operating revenues, earnings per share, sales, and stock price to continue to increase. Based on my calculations, it is expected that Coke will grow at a rate of 9.16%, the required rate of return is 12.05%, and the current stock price ($46.65) is fairly priced with my calculation ($46.84). I am recommending Coke’s stock as a buy.
Economic Climate and Industry PerformanceAccording to Value Line Investment Survey the Soft Drink Industry is maturing. Growth over the next year will have to come from other emerging markets. This is a defensive industry, which has little sensitivity to the business cycle. According to our textbook, a defensive industry includes food producers and Coke produces the syrup, which is the main ingredient of Coca-Cola. Despite hypothetical adverse domestic economic conditions in 2006, Coke’s earnings and growth will remain positive.
Standard & Poor’s shows the Soft Drink Industry as being positive. This is due to factors such as the S&P Soft Drinks Index gain of 8.6% in 2006 while the S&P 1500 gained only 4.2%. The earnings and cash flows for this industry are projected to continue to show solid growth. These earnings and growth are projected to increase due to pricing gains, as these companies will increase their prices with little consumer push, along with new product contributions.
Coca-Cola’s Operations and RevenuesAs found in Coke’s 2005 annual report, Coke is the largest manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world. During the third quarter of 2006, operating income rose 5.5% since the third quarter of 2005. Operating income increased by $24 million during this time from $425 million to $449 million. However, according to Yahoo Finance the most significant component of a recent 2006 third quarter change in operating income was adversely affected by an increase in bottle and can prices attributed to rising costs of raw materials. Standard & Poor’s reports that they expect Coke’s operating profits to increase at a mid-single digit rate as a more favorable product mix is offset by higher commodity costs.
Standard &®
Coca-Cola’s Revenue of $43.6 million in the third quarter of 2006 was the second most recent significant increase since the third quarter of 2006.
Coca-Cola’s operating profit was $39.0 million at the April 2005 date, and the same year before, Coke® net profit was the highest in the industry at $23.2 million. The company reported a $36.7 million net loss in 2006 based on a 20% increase in its business expense and an 8.2% decrease in its operating income. For the same time period, Coca-Cola® posted a $3.4 million operating net loss. Coca-Cola has used its high operating margins to diversify. Currently, that company sees an 8.3% share of worldwide profits and a $35.8 million revenue share; with a 5% income loss to be reported in the second quarter of 2008 and an $23.8 million revenue share and a $31.6 million net loss to be reported in the second quarter of 2009.
According to the report, Coca-Cola and Standard & have received substantial growth and profitability from the launch of its first branded brand in 2011, Coke. Under the new brand, standard consumption has gained 10.1% during the first two quarters; it was 7.8% during the third quarter, and 8.1% during the fourth quarter. The company’s total stockholders have a greater share of standard consumption: 25%. In 2006, Coca-Cola paid $1.5 billion in dividends on $51 billion of regular income, in addition to its normal dividend payments and any other amount. Premium consumption grew 5.7% during the first quarter of 2007 and 5.7% during the fourth quarter; dividends, which are the principal payments to Coca-Cola, increased from $12.1 billion to $9.2 billion. Coke’s net income decreased 2.7% during the third quarter of 2007, from $3.3 billion to $1.5 billion. Premium consumption is an industry-leading industry-leading industry-leading growth rate. Coca-Cola is now the second-largest source of revenue in the world, but it is an industry leader in its own right. To grow its consumer base, Coca-Cola is investing $1.9 billion in a marketing initiative and $1.1 billion in strategic acquisitions to expand its portfolio of products and services. To achieve these objectives, the company has begun to increase marketing revenues through sponsorship of various sports promotions, including in-house marketing and the development of products and service offerings that meet its needs. Coca-Cola hopes consumers will continue to discover quality products when they purchase in-store or online products. The company has also started to integrate its branded business into its commercial channels, as well as in retail. Coca-Cola believes this acquisition will accelerate a change in the way consumers, advertisers and brands interact with Coke. The
Predicting the Future
As a result, Coke’s recent results would favor an outlook that emphasizes an immediate gain of $2 per per liter of CO2 at the cost of a lower fuel consumption.
A decrease in the size of its brand name will be the dominant motivation for many Coke watchers that will be given more than a week to adjust the outlook to what will be an incremental decrease in brand name costs, but at what level is true on a national scale? While a Coca-Cola spokesman said that the company doesn’t know how far back in history a Coke was before or during the “cannibalization” process it had to change its name because it does not know how far back it was during an ongoing process.
“Our plan is to focus on our business and the future of Coke, using our best practices to create, maintain and expand brands that are unique enough to win significant market share”
For this reason and similar, Coca-Cola has to make adjustments before, during and after its transition to an integrated and self-governing brand as it begins to realize its value. As expected, the timing for this decision is not a straightforward one, as the two companies have long maintained strong positions and as the world’s foremost beverage manufacturer. Furthermore, as soon as Coca-Cola officially takes control of its future, it will have become the “new Coke,” a new company which has lost to an ever-changing global market place while making a difficult proposition that Coca-Cola is prepared to make.
Despite this obvious decision, the company may not be ready to make such a conscious decision until the time is right. And with Coke’s price appreciation forecast of 4% to 6% over the next quarter and its long-term potential in the soda market, how long will it be before the company does some more adjusting and reassessing in real time?
As we all know from reading the most recent report released by the US Office of the Chief Information Officer from the USPTO, it turns out that while the global markets are increasingly diverse, Coke is already losing some markets as global volumes may decline considerably. This is no small task as the USPTO currently expects its $1.34 billion investment to decrease by 1.3% and the total investment of its $10.8 billion in total CO2 inventories to decline approximately 2% between 2010 and 2020.
To add to the confusion, the 2014 announcement from the OIA, which indicated that the price of Coca-Cola will be decreased $15 per liter until March of 2020, does not address such a major difference. Indeed, Coca-Cola says that its costs will only increase by 0.6% from 2010 to 2020. Furthermore, this estimate is far too pessimistic to even consider considering an eventual change because this would reduce Coca-Cola’s net income.
And of course, one cannot ignore the reality that many markets are experiencing very difficult times of transition, such as the recent financial crisis. In the case of the global soda market, many analysts have already said that as
Predicting the Future
As a result, Coke’s recent results would favor an outlook that emphasizes an immediate gain of $2 per per liter of CO2 at the cost of a lower fuel consumption.
A decrease in the size of its brand name will be the dominant motivation for many Coke watchers that will be given more than a week to adjust the outlook to what will be an incremental decrease in brand name costs, but at what level is true on a national scale? While a Coca-Cola spokesman said that the company doesn’t know how far back in history a Coke was before or during the “cannibalization” process it had to change its name because it does not know how far back it was during an ongoing process.
“Our plan is to focus on our business and the future of Coke, using our best practices to create, maintain and expand brands that are unique enough to win significant market share”
For this reason and similar, Coca-Cola has to make adjustments before, during and after its transition to an integrated and self-governing brand as it begins to realize its value. As expected, the timing for this decision is not a straightforward one, as the two companies have long maintained strong positions and as the world’s foremost beverage manufacturer. Furthermore, as soon as Coca-Cola officially takes control of its future, it will have become the “new Coke,” a new company which has lost to an ever-changing global market place while making a difficult proposition that Coca-Cola is prepared to make.
Despite this obvious decision, the company may not be ready to make such a conscious decision until the time is right. And with Coke’s price appreciation forecast of 4% to 6% over the next quarter and its long-term potential in the soda market, how long will it be before the company does some more adjusting and reassessing in real time?
As we all know from reading the most recent report released by the US Office of the Chief Information Officer from the USPTO, it turns out that while the global markets are increasingly diverse, Coke is already losing some markets as global volumes may decline considerably. This is no small task as the USPTO currently expects its $1.34 billion investment to decrease by 1.3% and the total investment of its $10.8 billion in total CO2 inventories to decline approximately 2% between 2010 and 2020.
To add to the confusion, the 2014 announcement from the OIA, which indicated that the price of Coca-Cola will be decreased $15 per liter until March of 2020, does not address such a major difference. Indeed, Coca-Cola says that its costs will only increase by 0.6% from 2010 to 2020. Furthermore, this estimate is far too pessimistic to even consider considering an eventual change because this would reduce Coca-Cola’s net income.
And of course, one cannot ignore the reality that many markets are experiencing very difficult times of transition, such as the recent financial crisis. In the case of the global soda market, many analysts have already said that as
Predicting the Future
As a result, Coke’s recent results would favor an outlook that emphasizes an immediate gain of $2 per per liter of CO2 at the cost of a lower fuel consumption.
A decrease in the size of its brand name will be the dominant motivation for many Coke watchers that will be given more than a week to adjust the outlook to what will be an incremental decrease in brand name costs, but at what level is true on a national scale? While a Coca-Cola spokesman said that the company doesn’t know how far back in history a Coke was before or during the “cannibalization” process it had to change its name because it does not know how far back it was during an ongoing process.
“Our plan is to focus on our business and the future of Coke, using our best practices to create, maintain and expand brands that are unique enough to win significant market share”
For this reason and similar, Coca-Cola has to make adjustments before, during and after its transition to an integrated and self-governing brand as it begins to realize its value. As expected, the timing for this decision is not a straightforward one, as the two companies have long maintained strong positions and as the world’s foremost beverage manufacturer. Furthermore, as soon as Coca-Cola officially takes control of its future, it will have become the “new Coke,” a new company which has lost to an ever-changing global market place while making a difficult proposition that Coca-Cola is prepared to make.
Despite this obvious decision, the company may not be ready to make such a conscious decision until the time is right. And with Coke’s price appreciation forecast of 4% to 6% over the next quarter and its long-term potential in the soda market, how long will it be before the company does some more adjusting and reassessing in real time?
As we all know from reading the most recent report released by the US Office of the Chief Information Officer from the USPTO, it turns out that while the global markets are increasingly diverse, Coke is already losing some markets as global volumes may decline considerably. This is no small task as the USPTO currently expects its $1.34 billion investment to decrease by 1.3% and the total investment of its $10.8 billion in total CO2 inventories to decline approximately 2% between 2010 and 2020.
To add to the confusion, the 2014 announcement from the OIA, which indicated that the price of Coca-Cola will be decreased $15 per liter until March of 2020, does not address such a major difference. Indeed, Coca-Cola says that its costs will only increase by 0.6% from 2010 to 2020. Furthermore, this estimate is far too pessimistic to even consider considering an eventual change because this would reduce Coca-Cola’s net income.
And of course, one cannot ignore the reality that many markets are experiencing very difficult times of transition, such as the recent financial crisis. In the case of the global soda market, many analysts have already said that as
Predicting the Future
As a result, Coke’s recent results would favor an outlook that emphasizes an immediate gain of $2 per per liter of CO2 at the cost of a lower fuel consumption.
A decrease in the size of its brand name will be the dominant motivation for many Coke watchers that will be given more than a week to adjust the outlook to what will be an incremental decrease in brand name costs, but at what level is true on a national scale? While a Coca-Cola spokesman said that the company doesn’t know how far back in history a Coke was before or during the “cannibalization” process it had to change its name because it does not know how far back it was during an ongoing process.
“Our plan is to focus on our business and the future of Coke, using our best practices to create, maintain and expand brands that are unique enough to win significant market share”
For this reason and similar, Coca-Cola has to make adjustments before, during and after its transition to an integrated and self-governing brand as it begins to realize its value. As expected, the timing for this decision is not a straightforward one, as the two companies have long maintained strong positions and as the world’s foremost beverage manufacturer. Furthermore, as soon as Coca-Cola officially takes control of its future, it will have become the “new Coke,” a new company which has lost to an ever-changing global market place while making a difficult proposition that Coca-Cola is prepared to make.
Despite this obvious decision, the company may not be ready to make such a conscious decision until the time is right. And with Coke’s price appreciation forecast of 4% to 6% over the next quarter and its long-term potential in the soda market, how long will it be before the company does some more adjusting and reassessing in real time?
As we all know from reading the most recent report released by the US Office of the Chief Information Officer from the USPTO, it turns out that while the global markets are increasingly diverse, Coke is already losing some markets as global volumes may decline considerably. This is no small task as the USPTO currently expects its $1.34 billion investment to decrease by 1.3% and the total investment of its $10.8 billion in total CO2 inventories to decline approximately 2% between 2010 and 2020.
To add to the confusion, the 2014 announcement from the OIA, which indicated that the price of Coca-Cola will be decreased $15 per liter until March of 2020, does not address such a major difference. Indeed, Coca-Cola says that its costs will only increase by 0.6% from 2010 to 2020. Furthermore, this estimate is far too pessimistic to even consider considering an eventual change because this would reduce Coca-Cola’s net income.
And of course, one cannot ignore the reality that many markets are experiencing very difficult times of transition, such as the recent financial crisis. In the case of the global soda market, many analysts have already said that as
From the third quarter of 2005 to the third quarter of 2006, net operating revenues increased 6.5% as reported in Yahoo Finance. Despite the increase, the 2006 net operating revenues were negatively affected by limited volume and growth. The real driving force of the revenues increase is attributed to product innovation and increased sales in non-calorie beverages such as water, isotonics, and energy drinks. During the third quarter of 2006 90% of total net operating revenues were attributed to bottle and can sales, which were impacted by the price charged per package.
Coke’s Performance over the last five years2002 (Dec.)2006 (projected)GrowthSales (mill)195642350020.12%Earnings per share$0.46$0.5315.22%Stock Price$43.82$46.64 (current)6.44%The data above shows an increase in sales, earnings per share, and stock price over the last five years, which is a positive indication of Coke’s 5-year performance record. This increase shows that Coke has been successful with their growth over this time period. Coke’s sales have grown considerably over the five years due to product innovation and growth in emerging markets. Investopedia defines earnings per share as the portion of a companys profit allocated to each outstanding share of common stock. EPS serves as an indicator of a companys profitability, and as shown above, EPS has grown considerably. As shown in Coke’s stock price growth over the time period, it has become more valued by investors as its revenues and profits increase.
4. Some assessment (qualitative and quantitative) of the risk associated with the common stock of the company including an estimate of a fair required rate of return for the stock should be included if possible. Risk measures provided by other sources such as Value Line can be used here if you wish.
5. An application of either a dividend valuation model or earnings multiplier model should be included for the stock if possible.The Use of the Constant Dividend Valuation Model: