Growth & Income: The Coca-Cola Company

The Coca-Cola Company (KO) recently delivered strong second quarter results ahead of its own long-term targets. Growth was particularly strong overseas and in its non-carbonated beverages.

Coca-Cola’s famous soft-drink (and logo) is recognized in nearly every corner of the globe. The company was founded in 1892 and has global sales of nearly $32 billion.

Second Quarter Results

The company recently reported second quarter earnings per share of $1.06, beating the Zacks Consensus Estimate by 4 cents. Earnings per share increased 15% from the same quarter in 2009.

Coca-Cola reported volume gains of 5% worldwide. North American growth was 2%, while international volume grew 6%. Much of the growth was driven by increases in its “still” beverage volume (non-carbonated drinks like juices, sports drinks, teas, and water). Total volume in this category grew by 10%.

Overall net revenue increased 5% year-over-year.

The gross profit improved from 64.8% to 65.9%. Operating income grew by 13% over the same period, driven by solid sales growth and expense management.

Cash flow from operations has increased 18% year-to-date.

Steady Dividend Increases

Coca-Cola has a long and stable history of raising its dividend. Over the last 10 years, the company has increased it an average of 10% per year. Take a look at this chart chronicling its 10-year dividend history:

The stock currently yields 3.0%.

Outlook

Analysts have been revising their estimates higher following the latest earnings beat. The Zacks Consensus Estimate for 2010 is $3.46, representing 13% growth over 2009 EPS. The 2011 estimate is currently $3.77, or 9% higher.

The company is projected to grow earnings by 9% per year over the next five years.

Valuation

The stock trades at 17.1x forward earnings, in-line with the industry average.

Its price to book ratio is 5.3, a significant premium to the industry average of 2.8. Coca-Cola’s superior profitability justifies its higher ratio, however. Return on equity is an outstanding 30.9%, compared to the 24.2% average among its peers.

Its net profit margin is equally impressive, at 23.4%. This trumps the industry average of 5.9%.

Coca-Cola has a market cap of $137 billion. It is a Zacks #2 Rank (Buy) stock.

By Todd Bunton

COCA COLA CO (KO): Free Stock Analysis Report

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1 Comment on Growth & Income: The Coca-Cola Company

  1. I am pursuing my bachelor degree in business management and am learning about financial statements and regulatory bodies. I would like to compare and contrast a U. S. based company with a foreign company. I am curious about the accounting and reporting criteria such as the regulation environment, issues with foreign currency, differences in GAAP and other regulatory differences and similarities. Do you know if it is possible to access such information for an actual U.S. based and foreign company?

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