Leading beverage maker
The Coca-Cola Company (KO) is the world’s largest beverage company with a strong brand portfolio across the carbonated and noncarbonated beverage categories. Through its extensive distribution system, the company serves consumers in more than 200 countries.
Coca-Cola’s stock underperforms
Since 2014, Coca-Cola’s stock price has appreciated by 3.3% to $41.9 as of February 13, 2015. It has underperformed peers such as PepsiCo Inc. (PEP), Dr Pepper Snapple Group Inc. (DPS), and Monster Beverage Corporation (MNST). These three peers appreciated by 20.7%, 61.4%, and 76.3%, respectively.
Monster Beverage’s stock surged in August 2014 after news of the company’s deal with Coca-Cola. We looked at this deal in the previous part of this series.
The Consumer Staples Select Sector ETF (XLP) was up 16.6% in this period. The broader market represented by the S&P 500 Index appreciated by 14.5% during this period.
Currently, Coca-Cola has been trading at a price-earnings (or PE) multiple of 21.1. This is in line with its closest peer PepsiCo. The company’s other rival, Dr Pepper Snapple, is trading at a lower PE multiple of 19.8.
Coca-Cola is also trading at higher valuations compared to the S&P 500 Consumer Staples Sector Index and the S&P 500 Index. Coca-Cola’s 2014 revenues declined by 1.8% to $45.9 billion. Adjusted earnings per share (or EPS) declined by 1.9% to $2.04.
What’s the outlook for Coca-Cola?
Coca-Cola expects 2015 to be a transition year as the company implements a leaner operating model and makes significant media investments. The company anticipates a volatile consumer environment and continued softness in several emerging and developing markets.
However, the company does expect some improvement in its US operations. Coca-Cola expects currency headwinds to have ~5% impact on net revenues and a 7% to 8% adverse impact on profit before tax for 2015.
You can read more about Coca-Cola’s business in our Coca-Cola company overview series.