Categories Analysis, Consumer

KO Stock: Should you invest in Coca-Cola after Q4 earnings

The Coca-Cola Company (NYSE: KO) is a thriving global brand, dominating the soft drink market on the power of its diversified portfolio. The beverage giant has been busy rebranding the business lately, in an effort to expand its global footprint as a total beverage company.

The company’s stock reached a peak early last week ahead of the earnings announcement but entered a volatile phase later, though it rallied briefly soon after the announcement. Currently hovering near the $60-mark, KO has become more attractive after the dip. It is an all-time favorite among investors, thanks to the company’s exceptionally strong brand power and fundamentals.

Buy KO?

The current target price of $66.67 represents an 11% increase over the next twelve months. The company has raised its dividend consistently in recent years, drawing the attention of income investors. Those factors, combined with the solid return on equity and margin performance, make it a perfect bet for the long term.

Read management/analysts’ comments on Coca-Cola’s Q4 earnings

Though the business was affected by pandemic-related supply chain issues and people’s changing consumption habits, the company’s extensive sales and distribution network and efforts to streamline the system helped it navigate the crisis. However, the lingering uncertainty and threat of new COVID variants remain a concern.

The Coca-Cola Company Q4 2021 earnings infographic

“We expect the recovery will remain asynchronous, but we are encouraged by our growing industry, our unparalleled system strength, and a strategic transformation that enables us to be agile and to adapt. Our actions drove strong results in 2021 and we have confidence in our ability to deliver another year of strong performance in 2022 and over the long-term,” said Coca-Cola’s CEO James Quincey during his post-earnings interaction with analysts last week.

Q4 Results

Over the past several years, the company maintained strong financial performance that mostly exceeded expectations, and it was no different in the most recent quarter. In the fourth quarter of 2021, adjusted profit declined slightly to $0.45 per share but beat estimates. North America continues to be the top market in terms of sales, contributing strongly to the top line that rose to $9.5 billion.

Continuing its expansion drive, the company took full control of Bodyarmour a few months ago by acquiring the remaining stake in the sports drink company. It also inked a deal with Constellation Brands to launch Fresca Mixed, the spirit-based ready-to-drink cocktail brand, and broadened the partnership with Molson Coors to launch spiked lemonade under the Simply brand.

Peer Performance

Meanwhile, rival soft drink maker PepsiCo Inc. (NASDAQ: PEP) last week reported broad-based revenue growth for the fourth quarter that drove up the topline to $25.2 billion. Adjusted earnings increased 4% annually to $1.53 per share and topped expectations. Buoyed by the strong outcome, the management is predicting a 6% organic revenue growth for fiscal 2022.

PepsiCo vs. Coca-Cola: Which soft drink giant is a better investment?

KO entered 2022 on a high note and traded above the 52-week average since then. The stock traded lower throughout the last session, extending the post-earnings weakness. It has gained about 7% in the past six months.

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