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Stock Analysis: Is Coca-Cola Company (KO) a good buy this year?

The company has effectively navigated market challenges, leveraging its innovative business model and brand power

Beverage behemoth The Coca-Cola Company (NYSE: KO) has once again proved that its business does not get easily affected by market headwinds. The company maintained stable sales and earnings performance during the pandemic and remains largely unaffected by macroeconomic uncertainties.

The Atlanta-headquartered soft-drink giant owes its success mainly to the streamlined portfolio of brands and the management’s timely and prudent actions. Nearly nine months ago, the stock hit a record high before entering a volatile phase and eventually falling to a one-year low in the early fourth quarter. But KO soon changed course and made steady gains since then.

Buy KO?

Though the stock trades close to its 52-week average, the valuation looks fair considering the company’s strong earnings and resilience to adversities. It is one of the safest growth stocks, with the potential to create strong shareholder value. Moreover, the company raises its dividend at regular intervals – the latest dividend of $0.44 per share translates into a yield of 2.8%, which is well above the S&P 500 average. The stock is a good bet because it is poised to hit new highs in the coming months, in line with the long-term trend.

Coca-Cola-Q3-2022-Earnings-Infographic

Brand Power

North America continues to be the largest market for the company’s products, with sales growing in double digits in recent quarters. People buy Coca-Cola’s products as a habit, irrespective of the health of their personal finances. This allows it to raise prices whenever required, without affecting sales. Also, customers have responded positively to the company’s innovative moves like the launch of healthier, sugar-free products.


The Coca-Cola Company Q3 2022 Earnings Call Transcript


During an interaction with analysts a few months ago, Coca-Cola’s CEO James Quincey said, “as we look forward beyond this year, we continue to see great opportunity for our industry. We are allocating resources in a disciplined way to gain a share. Success from our marketing model is based on two critical components, linking occasions and passion points to drive engagement and leveraging experiments to optimize our marketing. This drives deeper connections with consumers reaching them in new and unique ways.”

Key Numbers

Coca-Cola enjoys the rare distinction of generating quarterly earnings that either beat or matched expectations consistently for more than five years. In the third quarter of 2022, adjusted profit moved up 7% annually to $0.69 per share, helped by a 10% growth in revenues to about $11 billion. Shrugging off the pandemic blues, sales increased steadily during the COVID period and surpassed analysts’ forecasts quite often.

When the company reports fourth-quarter results on February 14, the market will be looking for earnings of $0.45 per share on revenues of $9.98 billion. The stock experienced weakness in the final days of 2022 and hovered near the $ 60 mark. KO traded lower most of Wednesday’s session, after losing about 5% since the beginning of the year.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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