KO Fundamental Research Investment Analysis, Coca-Cola Company

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The Razor's Edge

2-Year Price History

Recent Price
(2/6/2009)
$43.55
52-Week Price
$40.29 - $61.90
Market Capitalization
$100.8 Billion
Dividend Yield
3.50%
Most Recent Dividend
$1.36

About Coca-Cola Company

Coca-Cola Company is considered to operate in the Consumer Goods sector. They specifically operate in the Beverages-Soft Drinks business segment contained within the Food & Beverage industry.

The Company is the manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world.

Ockham's Rating

At Ockham Research, we are always interested in understanding a company from a valuation standpoint, but even the most ardent value investor understands that there is more to the picture than simply valuation. So, we also apply a volatility studies for both the index and individual sectors. We utilize these tools in order to get a more complete picture of the investing environment. So, while most of our report highlights current valuation versus historical norms as well as peer analysis, there is still more going on behind the scenes.

What can you say about this market? No one likes to see the market going down so rapidly, but in times like these value investors should be cautiously opportunistic, as the market's decline has certainly uncovered some great bargains. We are simply reiterating KO's Fairly Valued rating as of this week, as KO's sector has resisted the downturn to some extent. Our analysis of this stock is little changed since last week's report, but please continue reading for further justification of our Fairly Valued rating.

First, KO increased in price by 1.94% since 01/31/2009 and this does not greatly impact our outlook.

Second, since our last report, there have been no significant adjustments in earnings expectations or guidance.

KO Stock Evaluation

Looking at KO since last week, there has been little movement in price on a percentage basis. Additionally, there haven't been significant revisions to earnings estimates for KO. Given this, we are maintaining our Fairly Valued rating. While there may not have been any meaningful changes in either price or earnings outlook, we still want to analyze where KO is in relationship to its historical fundamentals. Looking at the ratios and multiples described below and throughout this report is the best way to evaluate the strength of KO's current Fairly Valued rating.

KO Revenue

As we have often noted, in our valuation methodology, "Cash is King." Well, it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, KO the high and low end of the Price to Sales per share ratios are 3.74x and 2.72x respectively.

Notice that KO's current Price to Sales per share ratio is 2.94x, which is below its historical average only slightly. So, while not a huge positive for our analysis, we do feel it is worth noting that KO does look a bit undervalued on a Price to Sales basis, all other factors being equal. However, if the Price to Sales ratio drops further, Ockham Research is likely to become more bullish on this stock.

KO Cash Earnings

As the old saying goes, "Cash is King!" However, we prefer to capture a few other items within our analysis to identify "cash earnings". Nevertheless, an analysis of Cash Earnings is absolutely pivotal to assessing a company's value, and currently KO is below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for KO, the current level of Cash Earnings compared to its historical levels helps identify where KO is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 15.03 and a historical low Cash Earnings per share ratio of 10.89, an investor can relate where value becomes optimal.

With a historical average Cash Earnings ratio of 12.96, the current Cash Earnings ratio of 11.03 is a positive opportunity for value in the Ockham view. Naturally, we would love to see a deeper value opportunity for KO, but to get there one of two things must occur (or both). Either the stock price must decline further to increase the long term buying opportunity, or the management at KO needs to earn more cash. If either, or both, of these occur, then we could see a significant gap emerge between what investors were willing to pay for in the past, and where KO is trading currently (latest close price of $43.55).

KO Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from KO against the historic high and low levels over an available data range. Because KO has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In KO’s case, the estimated annual dividend is $1.52 producing a current dividend yield of 3.49%. The highest dividend yield from KO in recent history was 3.77% while the lowest dividend yield was 1.02%. KO’s current dividend yield is therefore significantly higher than its median dividend yield historically. In fact, the current yield is 45.72% above the median which weighs very positively on our analysis of KO.

Peer Comparison

:

Coca-Cola Company Industry Grouping

(2/6/2009)
Company Ticker Market Cap (Ml) Latest
Price
Price/Cash Earnings Price/Sales 5-Yr. Rev.
Growth Rate
5-Yr.
Avg. ROE.
Current 10-Yr. Range* Current 10-Yr. Range*
Peer Company Averages (not incuding KO) 9.50 8.63 » 27.01 1.41 1.22 » 3.14 5.98% 28.73%
*10 year range does not include current year values
Coca-Cola Company KO $100.8 Billion $43.55 11.03 11.01 » 56.20 2.94 2.87 » 8.13 8.08% 29.72%
PepsiCo, Inc. PEP $83.1 Billion $53.53 10.18 10.26 » 23.67 1.84 1.83 » 3.67 9.47% 31.74%
Diageo PLC ADS DEO $39.2 Billion $55.58 10.45 7.14 » 29.03 1.96 1.16 » 4.25 7.48% 41.02%
Kraft Foods, Inc. Class A KFT $38.7 Billion $26.34 8.66 8.53 » 18.52 0.91 0.89 » 2.56 4.61% 10.04%
Unilever N.V. UN $34.6 Billion $21.72 7.41 7.79 » 28.90 0.96 0.98 » 1.86 2.97% 40.22%
General Mills, Inc. GIS $19.3 Billion $58.84 10.80 9.46 » 34.91 1.39 1.25 » 3.34 5.38% 20.62%
Current
Rating on:
KO
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RazorWire™ & Community Discussion

America's Nightly Scoreboard
2/5/2009 7:48 PM
America's Nightly Scoreboard
Fit up until february 28a $14,000 shopping spree, a vip weekend at the COCA-COLA 602 have a right along with me in a two-seat darfur could is a cool promotion for office depot has done such a great thing to keeping the fans and
Fox Business
2/4/2009 12:37 PM
Fox Business
I'm sure other people have mentioned that to you, also. And they are doing relatively they did relatively well last craft had a little disappointment today. We like COCA-COLA, companies like that and we think they'll continue to be good. You get a nice yield with COCA-COLA, about 3.5%. Then looking at other areas where we think there will be growth, when the growth picks up in the economy, industrial materials and sectors like that that we're looking at. >> tom: so these numbers that
Closing Bell
1/30/2009 3:00 PM
Closing Bell
After cnbc's charlie gasparino came after the bad bank plan would buy troubled assets from COCA-COLA is dropping the word classic from their branning. That's the news now.
Power Lunch
1/30/2009 12:00 PM
Power Lunch
>>> caterpillar is laying off 2100 workers on top of the 20,000 layoffs announced earlier this week. COCA-COLA is dropping the word classic from its branding of its flagship cola. I'm sharon epperson.
Squawk On The Street
1/30/2009 10:06 AM
Squawk On The Street
>> there is a very important headline. >> yeah. COCA-COLA is dropping the "classic" on coke classic. For those of you who don't remember, '85 COCA-COLA company did the dumbest thing that any american company has ever done. Okay? Stupidest thing they could have they changed the formula for coke.
The Opening Bell on Fox Business
1/30/2009 9:20 AM
The Opening Bell on Fox Business
And af got to do that all the go down, and go up and make sure you can see the strategic picture as well as really into the nuts and bolts of the organization and that's what we're all about in the COCA-COLA company and we had a company, we've got a complete new organization 0 that's very lean, that's flat, has the ability to make decisions.
The Opening Bell on Fox Business
1/30/2009 9:17 AM
The Opening Bell on Fox Business
Alex, standing by with a special interview over in davos. Alexis: that's right, connell. Just earlier this morning, I had the opportunity to speak to the ceo of COCA-COLA. I asked him if healthy and diversified drinks are still as important in this economy? >> well, when I said to you last
The Opening Bell on Fox Business
1/30/2009 9:11 AM
The Opening Bell on Fox Business
We'll see if there are any changes made to it before it gets to president obama's desk. The opening bell in 181/2 minutes and we're straight to the trading floors coming up next plus, alexis sitting down with the ceo of COCA-COLA and finding out how the company is positioning itself to make it through the global recession. More on the opening bell with here in new york and in davos
Money For Breakfast
1/30/2009 7:22 AM
Money For Breakfast
The u.S., europe, china, this has got to be in concert, rebooting these economies of the world. Alexis: it's very interesting, i've talked to the likes of kent from COCA-COLA, the likes of michael splinter from applied materials, a lot of executives that I am talking to here, all of which have 80% of their profits or more overseas, yet the real domestic players did
Fox Business
1/29/2009 11:01 AM
Fox Business
Of the big ones to the down side. Whirlpool, eastman kodak, those are some of the names, allstate getting hit hard today and then the up arrows are some of those consumer names, procter & gamble, COCA-COLA, these are the names that are to the upside and the financials are getting under some pressure here as well. A lot of traders still in that mowed. Want. People are very much buying what
Fox Business
1/29/2009 10:12 AM
Fox Business
Take a peek here, 3m which is one of the fourth quarter net pulling 37%, they just come out with their numbers, but they are doing well and leading the dow to the upside and you may notice COCA-COLA, prokt and golf ball and these then bring me to the next stuff and consumer stocks and back to looking at the consumer stocks being a good play here, a defensive play, up arrows to the consumer stocks,
Power Lunch
1/28/2009 12:10 PM
Power Lunch
Brands come out stronger out of this crisis than when we went into it. >> putting china aside for a moment, tell me about the other emerging economies. A big piece of that, COCA-COLA in russia. Journal" and I know we're waiting to hear from vladimir putin in a little while, has the environment there changed? Do you not worry about the fact that things seem to be different
Power Lunch
1/28/2009 12:00 PM
Power Lunch
>> business tightens, political power players are meeting in davos, switzerland, for the world economic foreign. Ross westgate is there talking to them. We'll check in with him in a few >> first on cnbc, COCA-COLA's ceo will join maria bartiromo. >> we'll also talk with the ceo of honeywell who met with the president in the white house. >> we, of course, have live team
Power Lunch
1/27/2009 12:39 PM
Power Lunch
Logon and you can cast your we will have the results on friday and live coverage with some terrific guests from davos. Still ahead, the COCA-COLA ceo starting top right here on cnbc. And on "power lunch," too. The fed kicking off a two-day meeting today. Rates at basically zero. Not a lot they can do in that
Mad Money
1/23/2009 6:52 PM
Mad Money
Going to hurt them in terms of translation. Commodity costs are going to help them. We know mickey d's, we love mickey d's. COCA-COLA, I saw that down to not my favorite but not a bad kenner morgan, kmp is the class utility I know of. Remember, it's a pass play.
Fox Business
1/23/2009 2:49 PM
Fox Business
Around the world and beverages are a wonderful industry to be around the globe, we do enjoy a four to one share advantage due to the hard work of people along the floor, you and me, 80 years ago as the COCA-COLA company started to go around the world and once again, katy pain has thrown out the ganttlet. You're game for a fight with pepsi.
Fox Business
1/23/2009 2:49 PM
Fox Business
Our business is global. We do business in nearly every country in the world and we're seeing huge growth in parts of the world as people learn what wonderful refreshment COCA-COLA products can bring. >> it used to be in the days where we had major totalitarian governments controlling these places, there is still
Mad Money
1/22/2009 6:04 PM
Mad Money
Grand slam all over its face. State street, who would have thunk it or how about suntrust? Do you know who suntrust is? Think about the first bank of COCA-COLA I always considered it to be above banking. Just a great southern wealth including the family that founded coke. Today suntrust slashed its dividend and they slashed its
View All Coca-Cola Company Comments

Key Fundamentals

KO - Coca-Cola Company Fundamentals
Price (2/6/2009) $43.55
Volume (2/6/2009) 9.3 Million
10 Day Average Volume 9.8 Million
13 Week Price Range $40.50 - $47.29
52 Week Price Range $40.29 - $61.90
LTM Revenue $32.1 Billion
 
Shares Outstanding (12/2007) 2.3 Billion
Market Capitalization $100.8 Billion
Shares Held By Institutions 1.6 Billion
Institutional Holders 1,660
% Shares Held By Institutions 67.20%
Earnings Per Share (EPS) $2.57
P/E Ratio 16.90
Book Value Per Share $10.26
 
Gross Margin 68.50%
Quarterly Dividend 1.52
Dividend Yield 3.50%
Beta 0.59
Fiscal Year Ends December