The Coca-Cola Company: A Dividend King And Growing
The Coca-Cola Company (NYSE: KO) has been an attractive investment over the past few years because of its resilience in the face of tough times. The company has been able to maintain and even grow the business while also paying a healthy 2.8% dividend yield and not only that, increasing for the 59th consecutive year despite the pandemic and all the havoc it caused. The takeaway for investors is The Coca-Cola Company is a solid blue-chip company well-positioned for the coming 12 months and one that pays a market-beating dividend that is as or more reliable than any on the market.
The Coca-Cola Company Outpaces Consensus And Rises
The Coca-Cola Company reported Q2 revenue and earnings that were not only good but great compared to most of what’s been reported this cycle so far. The company reported $11.3 billion in net revenue for a gain of 11.9% over last year, with strength driven in part by volume growth. Volume growth is important to note because many S&P 500 companies are reporting revenue growth 100% supported by higher prices offset by lower volumes. In the case of The Coca-Cola Company, growth was seen in all brands, including the core Coca-Cola brand.
Looking at the bigger picture, the Q2 revenue is up more than 13% versus the pre-pandemic level and is a company record that beat the analyst's consensus estimate by 690 basis points as well. On an organic basis, adjusted for divestitures and acquisitions, sales are up 16%, with strength seen in all segments. On a volume basis, the case count is up 8%, aided by a 12% improvement in price/mix and a 4% increase in concentrate sales, offset by FX headwinds.
The margins came in a little mixed but no less favorable to the outlook. The GAAP operating margin is contracted by 910 basis points, but this is offset by one-off factors that are not relevant to the underlying operation. On an adjusted basis, the operating margin contracted by a much smaller 100 basis points to leave the EPS at $0.70 or up 4% from last year and $0.03 ahead of the analysts' consensus. The revenue and earnings strength is expected to carry into the end of the year as well, and the company guided higher because of it. The only negative in the outlook is that guidance is only slightly above the consensus figures.
The Coca-Cola Company Is Well-Supported By The Market
The Coca-Cola Company stock is well-supported by the market, with both analysts and institutions buying the stock. On the institutional end, big money has been actively buying the stock over the last year or more and bought double the amount sold in the last 12 months. The net of activity is more than $10 billion or about 3.7% of the market cap, with shares trading at $63.50. This brings their holdings up to 68.5%, and the analysts are equally bullish. On the analyst end, they rate the stock a Moderate Buy and have held that rating firm for the last year. The Marketbeat.com consensus price target, however, has been trending higher and is up in the 12-month, 3-month, and 1-month comparisons.
The Technical Outlook: The Coca-Cola Company Bottoms And Gears Up For Next Move
The Coca-Cola Company stock price began to correct in early spring, but that action is over. The post-release trading has the stock up 2.5% and confirming support and a reversal from the $60 level. The reversal is marked by a Head & Shoulders pattern, but investors should be cautious in the near term. The reversal is in play but may not lead to a sustained rally. It is possible shares of The Coca-Cola Company have entered a new trading range with a top near the $66 level. The Coca-Cola Company and its competitor Pepsico (NASDAQ: PEP) both trade at high multiples that could hinder price action in the near to mid-term. If that level can be overcome, the rally may continue to new highs.
