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%.
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.
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