Global non-alcoholic beverage manufacturer The Coca-Cola Company (KO) offers its beverages under the prominent brands Coca-Cola, Sprite, Fanta, Dasani, Minute Maid, and Powerade. The stock has gained 16.7% over the past year and 6.6% year-to-date to close its last trading session at $63.14.

The company continues to harness insights and passion points to strengthen its connection with current and new customers. The firm introduced the “Magic Weekends” campaign for Trademark Coca-Cola, the next chapter in the “Real Magic” platform.

For this promotion, the company engages with food service aggregators across all nine of its operational units, with a heavy emphasis on Coca-Cola Zero Sugar.

Also, KO announced a global partnership to launch the legendary Jack & Coke cocktail as a branded, ready-to-drink (RTD) pre-mixed cocktail alternative. The Jack Daniel’s & Coca-Cola RTD, inspired by the iconic bar cocktail, will be created using Jack Daniel’s Tennessee Whiskey and Coca-Cola. The beverage will be offered in countries worldwide, with an initial launch scheduled for Mexico in late 2022.

Here’s what could shape KO’s performance in the near term:

Strong Profitability

KO’s net revenues increased by 16% to $10.5 billion, while organic revenues (non-GAAP) increased by 18% for the first quarter ended March 2022. Its operating margin, which included factors affecting comparability, was 32.5%, up from 30.2% in the previous year.

KO’s trailing-12-months net income margin of 25.7% is 401.2% higher than the industry average of 5.1%. Also, its ROC, EBITDA margin, and ROA are 72.2%, 170.1%, and 131.7% higher than the respective industry averages. Furthermore, its gross profit margin of 60.3% is 814% higher than the industry average of 33.2%.

Impressive Growth Prospects

Street expects KO’s revenues and EPS to rise 8.1% and 6.5% year-over-year to $41.8 billion and $2.47, respectively, in fiscal 2022. In addition, KO’s EPS is expected to rise at a 6.6% CAGR over the next five years. Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in all of the trailing four quarters.

Consensus Rating and Price Target Indicate Potential Upside

Of the 17 Wall Street analysts that rated KO, 13 rated it Buy, and four rated it Hold. The 12-month median price target of $70.94 indicates a 12.4% potential upside. The price targets range from a low of $64.00 to a high of $76.00.

POWR Ratings Reflect Solid Prospects

KO has an overall grade of B, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. KO has a B grade for Quality and Stability. KO’s solid profitability is consistent with the Quality grade. In addition, the stock beta of 0.56 is in sync with the Stability grade.

Of the 35 stocks in the A-rated Beverages industry, KO is ranked #17.

Beyond what I stated above, we have graded KO for Sentiment, Value, Growth, and Momentum. Get all KO ratings here.

Bottom Line

While most companies continue to face increased cost pressures and ongoing supply issues, the firm utilizes revenue growth management (RGM) to create appealing customer and consumer solutions by segmenting markets based on occasion, brand, price, packaging, and channel.

Given the favorable analysts’ estimates and the company’s fundamental strength, the stock could see further upside in the near term.

How Does The Coca-Cola Company (KO) Stack Up Against its Peers?

KO has an overall POWR Rating of B, which equates to a Buy rating.  Check out these other stocks within the same industry with A (Strong Buy) ratings: Coca-Cola Consolidated Inc. (COKE), Embotelladora Andina S.A. (AKO.B), and Primo Water Corporation (PRMW).

KO shares fell $0.04 (-0.06%) in premarket trading Monday. Year-to-date, KO has gained 8.16%, versus a -18.16% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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