The Fed has been in its most aggressive monetary tightening campaign since the 1980s to tame soaring inflation. However, inflation is showing signs of cooling down, and the November CPI headline rate marked the fifth-straight monthly decline, as prices rose 7.1% annually, down from 7.7% in October.

With a market cap of 275.90 billion, beverage industry giant The Coca-Cola Company (KO) delivered impressive third-quarter results. The company’s revenue of $11.1 billion beat analysts’ estimates by 5.7% and its EPS of $0.69 surpassed the consensus estimate by 8.3%.

Keeping the sky-high inflation in mind, the company is focused on expanding its offerings to fit all consumers’ budgets. Additionally, the company is balancing the mix between affordability and premiumization while driving pricing actions in the marketplace.

KO introduced Simply Spiked Lemonade and Fresca Mixed in the United States this year through brand authorization agreements with Molson Coors Beverage Company (TAP) and Constellation Brands, Inc. (STZ), respectively. These initiatives support the company’s disciplined approach to becoming a total beverage company with beverage options for all occasions and needs.

In addition, the stock has a spectacular dividend-paying record. KO’s annual dividend of $1.76 yields 2.76% on the current share price. Its dividend payouts have increased at CAGRs of 3.2% and 3.5% over the past three and five years, respectively. KO has 60 years of consecutive dividend growth.

The stock has gained 10.4% over the past year and 8.17% over the past three months, closing its last trading session at $63.80. Also, it is trading above its 50-day and 200-day moving averages of $60.66 and $61.77, respectively, which is impressive.

Here’s what could influence KO’s performance in the upcoming months:

Solid Financials

For the fiscal third quarter ended September 30, KO’s non-GAAP net operating revenues increased 10% year-over-year to $11.05 billion. Its non-GAAP gross profit rose 6.5% from the prior-year quarter to $6.54 billion.

Also, the company’s non-GAAP net income increased 6.7% year-over-year to $3.01 billion, while its non-GAAP EPS came in at $0.69, representing an increase of 6.2% year-over-year.

Robust Profitability

KO’s trailing-12-month gross profit margin of 58.49% is 86.46% higher than the 31.37% industry average. Its trailing-12-month EBIT margin of 28.90% is 257.19% higher than the industry average of 8.09%, and the stock’s trailing-12-month net income margin of 23.44% is 463.90% higher than the industry average of 4.16%.

Its trailing-12-month ROCE, ROTC, and ROTA of 44.13%, 11.63%, and 10.73% are 316.6%, 88.7%, and 187.5% higher than their respective industry averages of 10.59%, 6.17%, and 3.73%.

Favorable Analyst Estimates

Analysts expect KO’s EPS and revenue for the fiscal fourth quarter ending December 2022 to increase 1.2% and 4% year-over-year to $0.46 and $9.85 billion, respectively.

Its EPS is expected to improve 7.4% year-over-year to $2.49 in the current fiscal year ending December 2022. Its revenue is likely to rise 10.5% from last year to $42.72 in the current year.

Moreover, the company has an impressive earnings surprise history, as it surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.

POWR Ratings Reflect Promising Prospects

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

Our proprietary rating system also evaluates each stock based on eight distinct categories. KO has an A grade for Sentiment, consistent with favorable analyst estimates.

Its Stability grade of B is in sync with its 60-month beta of 0.59.

KO also has a Quality grade of B, justified by its robust profitability.

In the A-rated Beverages industry, it is ranked #16 among 33 stocks.

Click here to see the additional POWR Ratings for KO for Growth, Value, and Momentum.

Bottom Line

Despite the macro headwinds, the company witnessed stable growth in the last reported quarter. Moreover, the company’s full-year guidance increase shows its resiliency.

Given the company’s brand popularity worldwide and solid positioning, I think KO is a safe bet.

How Does The Coca-Cola Company (KO) Stack up Against Its Peers?

While KO has an overall POWR Rating of B, one might want to consider looking at its industry peers, Coca-Cola Consolidated, Inc. (COKE) and Coca-Cola FEMSA, S.A.B. de C.V. (KOF), which have an overall A (Strong Buy) rating.

KO shares were trading at $63.31 per share on Thursday morning, down $0.49 (-0.77%). Year-to-date, KO has gained 10.09%, versus a -19.03% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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