Analyzing the Profit Potential for Coca-Cola (KO)

Industry behemoth The Coca-Cola Company (KO) is poised to announce its third-quarter results later this month. The company, which surpassed estimates in the previous quarter, has subsequently raised its outlook for the fiscal year.

For 2023, KO has revised its expected growth for comparable adjusted earnings per share, raising this from 4-5% to now between 5-6%. This upward trend extends to its prognosis for organic revenue, which has been upgraded to anticipate a rise of 8-9%, an increase from the formerly predicted range of 7-8%.

Meanwhile, KO remains dedicated to growing its presence through its soda-based products. Following an array of special-edition drinks, the firm is returning to its original focus with the intention of broadening the reach of its flagship brand.

In accordance with this strategy, KO is ready to unveil "Spiced" Coke, a new addition to its principal brand, and also plans to add a fresh variant, "Sprite Chill," to its Sprite product line.

Given this backdrop, let’s look at the trends of KO’s key financial metrics to understand why it could be wise to buy the stock now.

Analyzing Key Financial Indicators of The Coca-Cola Company From 2020 to 2023

The trailing-12-month net income of KO has shown a general upward trend over almost three-and-a-half years, albeit with fluctuations throughout the period.

• December 2020: $7.75 billion.
• April 2021: $7.22 billion.
• July 2021: $8.08 billion.
• October 2021: $8.81 billion.
• December 2021: $9.77 billion.
• April 2022: $10.31 billion.
• July 2022: $9.57 billion.
• September 2022: $9.93 billion.
• December 2022: $9.54 billion.
• March 2023: $9.87 billion.
• June 2023: $10.51 billion.

There was an initial decrease in net income from December 2020 to April 2021, falling from $7.75 billion to $7.22 billion. From April 2021, there was an appreciable increase, with only brief dips in July 2022 and December 2022.

As of June 2023, the company's net income reached a peak of $10.51 billion, being the highest recorded net income in the series. This indicates a growth rate of roughly 35.7% from the first value in December 2020.

It's worth noting that despite the overall growth during the period, the most significant fluctuations were seen in the second and fourth quarter of each year, reflecting potential seasonal variations in the company's performance.

The trailing-12-month revenue of KO has been progressively growing over the studied period, with a defining upward trend.

• The initial value stood at $33.01 billion as of December 31, 2020.
• By April 2022, the revenue increased by approximately $7.12 billion to reach $40.13 billion.
• In recent times, the revenue has shown more acceleration. By December 31, 2022, it reached $43 billion, displaying a growth of around 8% within less than a year from April 2022.
• Continuing this positive trajectory, the series concluded with the last revenue value of $44.14 billion as of June 30, 2023.

With reference to the first and last entries in the series, KO has experienced an estimated increase in revenue of about 33.7% across the studied time frame. The continued growth in the company's revenue indicates a persistently robust financial performance.

The series represents the asset turnover of KO over a period from December 31, 2020, to June 30, 2023. There has been a consistent positive trend in the asset turnover of KO during this period, starting from 0.35 on December 31, 2020, to 0.46 on June 30, 2023. The asset turnover experienced some fluctuations within that time frame, exhibiting minor but steady quarterly increases:

• From 0.35 in December 2020 to 0.36 in April 2021.
• A sharper increase to 0.4 by July 2021.
• Continued growth, reaching 0.42 by October 2021.
• It hovered at 0.42 by the end of 2021 but continued its upward trend through 2022, reaching 0.43 by April, 0.44 by July, and 0.46 by December.
• The growth then stagnated at 0.46 in the first half of 2023.

In terms of growth rate, calculated by comparing the first value to the last, the asset turnover has grown by approximately 32% from December 31, 2020, to June 30, 2023. Despite the overall growth, emphasis on more recent data suggests a slight stagnation in growth, with the asset turnover remaining constant at 0.46 from December 2022 till June 2023.

This pattern suggests that while KO effectively utilized its assets to generate revenue during this period, this efficiency has plateaued recently. Further data would be necessary to determine whether this is a temporary stall or indicative of future trends.

The trend and fluctuations in the analyst price target for KO show a general increase from $60 in November 2021 to $70 by May 2022, representing a growth rate of 16.67%. The price target began at 60 in November 2021 and remained the same up until December 23, 2021, when it increased to $61.5. Here are some key points:

• Steady Increase: From December 2021 to May 2022, there was a steady increase in the analyst price target, peaking at $70 in May 2022.
• Stability During Mid-Year: From May 2022 to October 2022, the analyst price target for KO remained stable at $70, despite a slight dip to $69.5 in July 2022.
• Downward Adjustment: From October 2022 to November 2022, there was a series of downward adjustments that saw the price target drop from $70 to $66. The price target remained at this level until mid-December.
• Late Year Increase: Starting from late December to the end of 2022, the analyst price target experienced a mild increase, from $66 to $68.
• Stability in Early 2023: From January 2023 through March 2023, the price target remained stable at $68. It then showed another small increase to $68.5, which held steady until the end of April.
• Final Increase: From late April 2023, the price target experienced its final increase from $68.5 to $70, where it remained stable up to at least October 2023. Overall, the data presents a picture of mild fluctuations with periods of stability and growth.

Analyzing Coca-Cola's Share Price Downward Trend from April to October 2023

Based on the provided data, the share price of KO over the mentioned period is showing a general downward trend. Here's a detailed breakdown:

• On April 14, 2023, the share price was $62.74.
• There was a slight increase in price in April, peaking at $63.80 on April 28, 2023.
• The upward trend continued into May, reaching $63.93 on May 5, 2023. However, prices started to decline after that.
• By June 2, 2023, the share price had dropped down to $60.14.
• Despite minor fluctuations, the price remained around the $60 mark until the end of June 2023.
• In July, the price dipped further to $59.94 but rallied back up to $61.54 mid-month before receding again to end the month at $62.52.
• August saw a slow decline in price, ending with a value of $60.32 on August 25, 2023. - September saw a rapid decline, where the share price went from $60.17 at the beginning of the month down to $58.04 by September 22, 2023, before falling steeply down to $56.27 by the end of the month.
• October saw a continued downward trend, bringing the price down to $52.38 by October 5, 2023.

Over the entire course of this timespan, there's an overall decrease in the share price of KO, indicating a decelerating or negative growth rate for the company. Here is a chart of KO's price over the past 180 days.

Assessing Coca-Cola's Market Performance: Quality, Sentiment, and Stability Metrics Analysis

The POWR Ratings grade of KO, which belongs to the Beverages category of stocks, has been maintained at B (Buy) over several months in the year 2023, as per the data provided. Please note that in the Beverages category, there are a total of 36 stocks.

The rank of KO within its category fluctuates slightly but indicates a better position and superior performance compared to other stocks in the same category.

For instance, at the beginning of April 2023, it was ranked at #19, reaching a peak rank of #18 by mid-May and early July. However, thereafter, it slowly improved and achieved its best rank of #12 by the second week of September.

As of the latest data point, which is dated October 5, 2023, KO holds a POWR grade of B (Buy) with a rank of #14 in its category. Here's a glimpse of its performance over the past few months based on the data:

• April 15, 2023 - POWR Grade: B, Rank in Category: #19
• June 24, 2023 - POWR Grade: B, Rank in Category: #14
• August 19, 2023 - POWR Grade: B, Rank in Category: #13
• September 09, 2023 - POWR Grade: B, Rank in Category: #12
• October 6, 2023 - POWR Grade: B, Rank in Category: #14

This assessment suggests that KO has been maintaining a steady performance with room for more growth in the competitive beverages industry.

Upon examination of the POWR Ratings for KO, the three most significant dimensions can be noted - Quality, Sentiment, and Stability. Their respective ratings exhibit distinct trends over the given period. Starting from April 2023 in our dataset,

• Quality: With the highest rating across all dimensions, the value of Quality for KO has been consistently high throughout the months, remaining within a close range of 93 to 96. A trend of gradual increase has been observed, ending with a rating of 96 as of October 5, 2023.
• Sentiment: Although starting at 80 in April 2023, the Sentiment dimension displays a noticeable uptick from July 2023 onwards. This clear upward trend culminates in a substantial leap to reach 91 by August 2023 before it slightly drops to 85 by October 5, 2023.
• Stability: The Stability dimension exhibits an impressive steady performance, maintaining a constant rating of 84 from April to September 2023. Only by October 5, 2023, we detect a minor decrease when the rating steps down to 83.

These highest-rated dimensions provide evidence of KO's exceptional Quality, positive market Sentiment, and robust Stability, effectively contributing to its market standing and outlook.

How does The Coca-Cola Company (KO) Stack Up Against its Peers?

Other stocks in the Beverages sector that may be worth considering are Coca-Cola HBC AG (CCHGY), Coca-Cola Consolidated, Inc. (COKE), and Coca-Cola FEMSA, S.A.B. de C.V. (KOF) - they have better POWR Ratings. Click here to explore more stocks in the Beverages industry.

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KO shares were trading at $52.46 per share on Friday afternoon, up $0.08 (+0.15%). Year-to-date, KO has declined -15.60%, versus a 13.25% rise in the benchmark S&P 500 index during the same period.

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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