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Beverage behemoth The Coca-Cola Company (NYSE: KO ) has once again proven that its business is not easily swayed by market winds. The company maintained stable sales and earnings performance during the pandemic and remained unaffected by macroeconomic conditions.
The Atlanta-headquartered beverage giant owes its success largely to its streamlined brand portfolio and timely and prudent management actions. Nearly nine months ago, the stock hit record highs before entering a volatile phase and finally falling to a one-year low early in the fourth quarter. But KO soon changed course and has been making steady gains ever since.
Did I buy it?
Although the stock is trading near its 52-week moving average, the valuation seems fair considering the company’s strong earnings and resilience to adversity. This is probably one of the safest growth stocks with the potential to create strong shareholder value. In addition, the company raises its dividend at regular intervals – the latest dividend of $0.44 per share translates to 2.8%, which is higher than the average of the S&P 500. The stock is a good bet as it is poised to reach new highs in the coming months, in line with the long-term trend.
Brand power
North America continues to be the largest market for the company’s products, with sales doubling in the last quarter. People buy Coca-Cola products as a matter of habit, regardless of their personal financial health. This allows to raise prices when needed, without affecting sales. In addition, customers have responded positively to the company’s innovative moves such as the launch of healthier and sugar-free products.
Coca-Cola Company Q3 2022 Earnings Call Transcript
During an interaction with analysts a few months ago, Coca-Cola CEO James Quincey said, “As we look forward to this year, we continue to see great opportunities for our industry. We allocate resources in a disciplined way to acquire shares. The success of our marketing model is based on two critical components, connecting opportunities and passion points to drive engagement and leveraging experiments to optimize our marketing.This creates a deeper connection with consumers that we can reach in new and unique ways.
Key Number
Coca-Cola enjoys the rare distinction of reporting monthly earnings that beat or match expectations consistently for more than five years. In the third quarter of 2022, adjusted earnings rose 7% year over year to $0.69 per share, helped by 10% revenue growth to about $11 billion. Banishing the pandemic blues, sales are rising and often exceeding analysts’ forecasts.
When the company reports its fourth-quarter results on February 14, the market will be looking for earnings of $0.45 per share on revenue of $9.98 billion. Shares experienced weakness in the last days of 2022 and approached the $60 mark. KO traded the lowest in Wednesday’s session, after losing about 5% since the beginning of the year.
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