Beverage giant The Coca-Cola Company (KO) manufactures, markets, and sells various non-alcoholic beverages worldwide. The company provides sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, tea and coffee, and energy drinks.

On June 13, 2022, KO and Brown-Forman Corporation (BFA) announced their partnership to launch the iconic Jack & Coke cocktail as a branded, ready-to-drink and pre-mixed cocktail option. This collaboration promises to offer consumers a new and wholesome experience.

James Quincey, KO’s Chairman, and CEO, said, “We are excited about our new relationship with Brown-Forman and look forward to the introduction of Jack Daniel’s & Coca-Cola.”

KO’s dividend payouts have increased at a 2.9% CAGR over the past three years and 3.6% over the past five years. Its current dividend yield is 2.82%, and its four-year-average yield amounts to 3.10%. Moreover, the company has a record of 59 consecutive years of dividend growth.

KO has lost marginally over the past month to close the last trading session at $62.32. However, it has gained 5.3% year-to-date and 11.6% over the past year.

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

Solid Financials

KO’s net operating revenues for the second quarter ended July 1, 2022, came in at $11.32 billion, up 11.8% year-over-year. Its gross profit came in at $6.50 billion, up 2.4% year-over-year. Also, KO’s North American segment revenues came in at $4.03 billion, up 19.2% year-over-year.

Furthermore, KO’s non-GAAP operating income came in at $3.46 billion, up 8% year-over-year. The company’s non-GAAP net income came in at $3.06 billion, up 4.4% year-over-year. 

Favorable Analyst Expectations

Analysts expect KO’s revenue to increase 9% year-over-year in 2022 and 3.9% year-over-year in 2023. Its EPS is expected to increase 6% year-over-year in 2022 and 5.7% year-over-year in 2023. Also, EPS is estimated to grow 5.5% per annum for the next five years. In addition, it has surpassed EPS estimates in all the trailing four quarters.

Of the 12 Wall Street analysts that rated KO, nine rated it Buy, while three rated it Hold. Wall Street analysts expect the stock to hit $70.25 soon, indicating a potential upside of 12.7%.

Robust Profitability Margins

KO’s trailing-12-month gross profit margin of 58.89% is 79.4% higher than the industry average of 32.83%. Its trailing-12-month EBITDA margin of 32.01% is 160.2% higher than the industry average of 12.30%. Moreover, its trailing-12-month net income margin of 23.16% is 370% higher than the industry average of 4.93%.

In addition, KO’s trailing-12-month ROCE, ROTC, and ROTA of 42.30%, 11.09%, and 10.27%, compared with the industry averages of 12.21%, 6.21%, and 4.78%, respectively.

POWR Ratings Reflect Promising Outlook

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

It has a B grade for Quality and Sentiment, consistent with its higher-than-industry profitability margins and favorable analysts’ expectations. The stock also has a B grade for Stability, in sync with its beta of 0.54.

In the 35-stock Beverages industry, KO is ranked #21. The industry is rated A.

Click here for the additional POWR Ratings for KO (Growth, Value, and Momentum). View all the top stocks in the Beverages industry here.

Bottom Line

KO’s financials have witnessed steady growth over the past years. Its revenue has increased at a 5.4% CAGR, while its EPS has grown at a 10.3% CAGR over the past three years. Moreover, Wall Street analysts are bullish on the stock. And given the beverage giant’s solid dividend-paying record, I think KO could be an ideal addition to your retirement portfolio.

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

While KO has an overall POWR Rating of B, one might consider looking at its industry peers, Coca-Cola Consolidated, Inc. (COKE), Carlsberg A/S (CABGY), and Primo Water Corporation (PRMW), which have an overall A (Strong Buy) rating.

KO shares rose $0.09 (+0.14%) in premarket trading Monday. Year-to-date, KO has gained 6.98%, versus a -13.42% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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