Beverage giant The Coca-Cola Company (KO) manufactures, markets, and sells various non-alcoholic beverages globally. Since entering into the ready-to-drink (RTD) alcohol beverages category in 2018, the company is leveraging brands with strong credentials and is on its journey to becoming a total beverage company with beverage options for all occasions and need states.

Moreover, the company continues to engage and attract consumers through globally scaled marketing campaigns driven by consumer insights. The company aims to leverage its capabilities to sustain topline growth amidst the ongoing inflationary backdrop.

The stock has gained 1.6% intraday closing its last trading session at $60.60. Also, it is trading 9.82% lower than its 52-week-high of $67.20.

Furthermore, the stock has a remarkable dividend-paying record. KO’s annual dividend of $1.76 yields 2.95% 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.

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

Solid Financials

During the fiscal third quarter that 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 85.5% higher than the 31.53% industry average. Its trailing-12-month EBIT margin of 28.90% is 280.3% higher than the industry average of 7.60%, and the stock’s trailing-12-month net income margin of 23.44% is 487.3% higher than the industry average of 3.99%.

Its trailing-12-month ROCE, ROTC, and ROTA of 44.13%, 11.63%, and 10.73% are 324.3%, 88.7%, and 198.3% higher than their respective industry averages of 10.40%, 6.17%, and 3.60%.

Favorable Analysts Expectations

Street expects KO’s EPS to improve 2.7% year-over-year to $2.56 in the current year, 2023. Its revenue is likely to rise 3.6% from last year to $44.33 in the current year. It has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.

Additionally, out of the six Wall Street analysts that rated KO, five rated it Buy, while one rated it Hold. The 12-month median price target of $67 indicates a 10.6% potential upside. The price targets range from a low of $62.00 to a high of $70.00.

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 optimistic analyst estimates.

KO also has a B grade for Stability, in sync with its 60-month beta of 0.56.

Its B grade for Quality is justified by its robust profitability.

In the B-rated Beverages industry, it is ranked #15 among 37 stocks.

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

Bottom Line

KO has an impressive record of 60 years of dividend payments. Moreover, the company has witnessed stable revenue and EPS growth, which should sustain, considering its worldwide reach.

The preliminary Consumer Sentiment Index for February rose to 66.4 from 64.9 last month amid easing inflation and a strong labor market that boosted optimism.

However, Federal Reserve Chair Jerome Powell recently said that the US central bank’s fight to tame inflation could last “quite a bit of time.” This could potentially trigger a recession.

Given KO’s solid fundamentals and reliable dividend payments, it could be worth holding now and forever.

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, Kirin Holdings Co. Ltd. ADR (KNBWY), Coca-Cola Consolidated, Inc. (COKE), and Embotelladora Andina S.A. (AKO.B), which have an overall A (Strong Buy) rating.

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KO shares were unchanged in premarket trading Tuesday. Year-to-date, KO has declined -4.62%, versus a 8.07% 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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