Free Annual Reports
Coke Continues Profit Growth
The Coca-Cola Company (NYSE:KO) racked up a sales increase of 5% and profits rose 9% in its third quarter. Worldwide sales volumes increased by 5%, with emerging markets particularly strong. Revenue topped analyst expectations while net income fell slightly short.
IN PICTURES: 20 Tools For Building Up Your Portfolio
Coke's Third Quarter
Sales increased from $8.04 billion in last year's third quarter to $8.43 billion in this year's. Net income rose from $1.9 billion to $2.06 billion, or 88 cents a share from 81 cents a share. International volume grew 6%, while North American volume rose 2%.Year-to-date cash from operations increased to $7.2 billion, a 15% increase. The quarter's results follow strong results from the company's first and second quarters this fiscal year.
Coke's Strategy
Coca-Cola's ongoing development of emerging markets is worth watching. The company achieved 30% volume growth in Russia, and double-digit growth in India despite adverse weather conditions which ordinarily hamper sales. Pacific volume grew 11% in the quarter with 12% growth in China, while the important Latin American market, also hit by weather problems, grew 4%.The continuing strength of Coke's operations in developed markets of Europe and North American, though, showed gains despite the still lagging economies there.
Soft Drink Rivals
Coke's main rival, PepsiCo (NYSE:PEP) is not allowing Coke free reign in emerging markets. Pepsi announced recently it will invest $140 million to build its tenth plant in Russia. Pepsi's stated goal is to become a "premier food and beverage company in Russia." To that end, Pepsi will eventually invest $1 billion. Although Pepsi made a deal earlier this year with rival Dr. Pepper Snapple (NYSE:DPS) which added to its top line, Pepsi did cut its full year forecast slightly. Earlier this year, Coke acquired its bottler, Coca Cola Enterprises (NYSE:CCE), as Pepsi did the same, so integration of those operations will also continue.
Smaller Players
Investors might want to keep in mind other soft drink companies such as Hansen Natural (Nasdaq:HANS), maker of the Monster energy drink. The company has a relatively strong cash position, generates a high return on invested capital (ROIC), so along with its appealing products it flies almost under the radar compared to Pepsi and Coke. National Beverage (Nasdaq:FIZZ), another smaller soda player, also continues to quietly produce good results.
A Look at Coke Stock
The economy is still lousy, soft drinks are under the gun for their sugary, carbonated contributions to obesity and poor health, and the developing world markets are mature. Competition is and will remain fierce. Yet Coca Cola continues to produce excellent income growth, pays a decent dividend currently yielding nearly 3%, and is still the number one soft drink company in the world. It is also the pure play leader, as Pepsi, with its Frito-Lay division, is a two-headed snack and drink beast. The P/E multiple on Coke stock is 19 plus right now, a bit pricey, though the forward multiple at 15 is more reasonable. Sometimes of course you have to pay up for growth. Although we love the company, we liked the stock a lot more back at $50. (What's the best indicator of a company's future success? Its ability to succeed when others fail. To learn more, see Competitive Advantage Counts.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 20 Tools For Building Up Your Portfolio
Coke's Third Quarter
Sales increased from $8.04 billion in last year's third quarter to $8.43 billion in this year's. Net income rose from $1.9 billion to $2.06 billion, or 88 cents a share from 81 cents a share. International volume grew 6%, while North American volume rose 2%.Year-to-date cash from operations increased to $7.2 billion, a 15% increase. The quarter's results follow strong results from the company's first and second quarters this fiscal year.
Coke's Strategy
Coca-Cola's ongoing development of emerging markets is worth watching. The company achieved 30% volume growth in Russia, and double-digit growth in India despite adverse weather conditions which ordinarily hamper sales. Pacific volume grew 11% in the quarter with 12% growth in China, while the important Latin American market, also hit by weather problems, grew 4%.The continuing strength of Coke's operations in developed markets of Europe and North American, though, showed gains despite the still lagging economies there.
Coke's main rival, PepsiCo (NYSE:PEP) is not allowing Coke free reign in emerging markets. Pepsi announced recently it will invest $140 million to build its tenth plant in Russia. Pepsi's stated goal is to become a "premier food and beverage company in Russia." To that end, Pepsi will eventually invest $1 billion. Although Pepsi made a deal earlier this year with rival Dr. Pepper Snapple (NYSE:DPS) which added to its top line, Pepsi did cut its full year forecast slightly. Earlier this year, Coke acquired its bottler, Coca Cola Enterprises (NYSE:CCE), as Pepsi did the same, so integration of those operations will also continue.
Smaller Players
Investors might want to keep in mind other soft drink companies such as Hansen Natural (Nasdaq:HANS), maker of the Monster energy drink. The company has a relatively strong cash position, generates a high return on invested capital (ROIC), so along with its appealing products it flies almost under the radar compared to Pepsi and Coke. National Beverage (Nasdaq:FIZZ), another smaller soda player, also continues to quietly produce good results.
A Look at Coke Stock
The economy is still lousy, soft drinks are under the gun for their sugary, carbonated contributions to obesity and poor health, and the developing world markets are mature. Competition is and will remain fierce. Yet Coca Cola continues to produce excellent income growth, pays a decent dividend currently yielding nearly 3%, and is still the number one soft drink company in the world. It is also the pure play leader, as Pepsi, with its Frito-Lay division, is a two-headed snack and drink beast. The P/E multiple on Coke stock is 19 plus right now, a bit pricey, though the forward multiple at 15 is more reasonable. Sometimes of course you have to pay up for growth. Although we love the company, we liked the stock a lot more back at $50. (What's the best indicator of a company's future success? Its ability to succeed when others fail. To learn more, see Competitive Advantage Counts.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Free Annual Reports
