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Coca-Cola Announces Its Plans to Expand in Brazil

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Jul. 19 2016, Updated 12:06 p.m. ET

Price movement

The Coca-Cola Company (KO) has a market cap of $197.7 billion. It fell by 0.13% to close at $45.63 per share on July 15, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 0.55%, 1.4%, and 7.9%, respectively, on the same day. KO is trading 1.3% above its 20-day moving average, 1.8% above its 50-day moving average, and 5.6% above its 200-day moving average.

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Related ETFs and peers

The Schwab US Broad Market ETF (SCHB) invests 0.75% of its holdings in Coca-Cola. The ETF tracks a market-cap-weighted index that measures the largest 2,500 stocks in the US. The YTD price movement of SCHB was 6.4% on July 15.

The iShares Dow Jones Select Dividend ETF (DVY) invests 0.75% of its holdings in Coca-Cola. The ETF tracks a dividend-weighted index of the US companies. The index selects roughly 100 stocks based on the dividend yield from a broad market-cap universe.

The market caps of Coca-Cola’s competitors are as follows:

  • PepsiCo (PEP)—$158.3 billion
  • Dr Pepper Snapple Group (DPS)—$18.0 billion

Latest news on Coca-Cola

In a press release on July 15, 2016, Bloomberg reported, “Coca-Cola Co. is planning to sell packaged Arabica coffee beans to Brazilian consumers as the world’s largest soft-drink producer expands in breakfast beverages.”

It also added, “The Atlanta-based company will sell packaged beans through a local tea brand it owns Leao as it seeks further diversification, Coca-Cola’s Brazil unit said Thursday. Coca-Cola has a partnership agreement with coffee exporter Tristao Companhia de Comercio Exterior, which will acquire and roast the beans. The company didn’t provide the deal’s financial details.”

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Coca-Cola’s performance in 1Q16

In 1Q16, Coca-Cola reported net operating revenues of $10.3 billion—a fall of 3.7%, as compared to net operating revenues of $10.7 billion in 1Q15. The company’s gross profit margin and operating income fell by 2.1% and 6.8%, respectively, in 1Q16 over 1Q15.

Its net income and EPS (earnings per share) fell to $1.5 billion and $0.34, respectively, in 1Q16, as compared to $1.6 billion and $0.35, respectively, in 1Q15. Coca-Cola’s total cash, cash equivalents, and short-term investments rose by 20%, and its inventories rose by 5.2% in 1Q16 over 4Q15. Its current ratio and long-term debt-to-equity ratio fell to 1.18x and 1.07x, respectively, in 1Q16, as compared to 1.24x and 1.1x, respectively, in 4Q15.

Projections

The company made the following projections for fiscal 2016:

  • organic revenue growth of 4%–5%
  • comparable currency-neutral income before taxes to grow by 6%–8%
  • comparable currency-neutral EPS growth of 4%–6%
  • effective tax rate of 22.5%
  • repurchase shares worth $2.0 billion–$2.5 billion

The company updated the impact of acquisitions, divestitures, and other structural items on its second quarter results due to the formation of Coca-Cola European Partners. It expects these items to have a 4%–5% impact on income before taxes and a 5%–6% impact on net revenues in 2Q16.

In the next part of this series, we’ll discuss Sealed Air Corporation.

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