The Coca-Cola Company

KO Details

The Coca-Cola Company (NYSE: KO) is a global beverage company with its trademark and products marketed in over 200 countries. KO produces, sells, and distributes a variety of non-alcoholic beverage brands, which it divides into the following categories: sparkling soft drinks, improved water, juice, plant-based beverages, and energy drinks. Coca-Cola, Diet Coke, Fanta, and Sprite are some of the most popular effervescent soft drink brands worldwide.

New Partnership to Encourage Recycling: KO announced a new partnership with Lime, a leading provider of electric vehicle rental services, on August 25, 2021, to reward individuals devoted to recycling. With the company's shift to 100% recycled plastic material (rPET) packaging across numerous items in its brand portfolio, this strategy has reduced its usage of new plastic in North America by more than 20% since 2018.

Robust H1FY21 Results: The company reported a 21.57% increase in net operating revenues to USD 19.15 billion during H1FY21 (ended July 02, 2021) compared to USD 15.75 billion during H1FY20 (ended June 26, 2021), primarily due to the gradual reopening of away-from-home channels in many markets and the positive impact from foreign currency movements. Its consolidated net income improved to USD 4.88 billion during H1FY21 from USD 4.55 billion reported in H1FY20. As of July 02, 2021, the company's cash and cash equivalents (including short-term investments and marketable securities) amounted to USD 13.04 billion, with total debt of USD 42.01 billion. Compared to H1FY20, global concentrate sales volume rose 15%, and unit case volume increased 9% in H1FY21.

Key Risks:  The sale of concentrates and syrups to independent bottling partners accounts for a significant share of KO's net operating revenues. If KO cannot provide an adequate balance of incentives to its bottling partners or its bottling partners are dissatisfied with the development initiatives, they may take measures that are harmful to the firm or its brands in the long run. Furthermore, the company's non-alcoholic ready-to-drink beverages are relatively seasonal, with the most significant sales volumes occurring in the second and third calendar quarters.

Outlook: KO stated in its Q2FY21 press release that it expects an organic (non-GAAP) revenue growth of 12% - 14% in FY21. It also expects a 1% - 2% currency tailwind, depending on current rates and considering the impact of hedged holdings. Its comparable (non-GAAP) EPS growth is estimated to range from 13% - 15% from USD 1.95 reported in FY20.

Valuation Methodology: Price/Earnings per share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

KO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: KO's share price has increased only 1.56% in the past six months and is currently leaning towards the higher end of the 52-week range of USD 47.30 to USD 57.56. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 31.91. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 57.02. Considering the current trading levels, strong financial performance, market dominance, consistent dividend yield, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 53.87, down 0.31% as of September 24, 2021, 1:08 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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