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Why Did Coca-Cola’s Stock Price Rise on August 29?

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Price movement

Coca-Cola (KO) has a market cap of $189.4 billion. It rose by 0.51% to close at $43.54 per share on August 29, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -0.46%, -0.21%, and 2.9%, respectively, on the same day. KO is trading 0.42% below its 20-day moving average, 2.1% below its 50-day moving average, and 0.43% below 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 cap-weighted index that measures the largest 2,500 stocks in the United States. The YTD price movement of SCHB was 7.8% on August 29.

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 US companies. The index selects roughly 100 stocks based on dividend yield from a broad market-cap universe.

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

  • PepsiCo (PEP) — $156.0 billion
  • Dr Pepper Snapple Group (DPS) — $17.4 billion

Latest news on Coca-Cola

In a press release on August 29, 2016, Coca-Cola reported that “the Coca-Cola Company and its global bottling partners (the Coca-Cola system) today announced they have met their goal to replenish, or in other words balance, the equivalent amount of water used in their global sales volume back to nature and communities.”

It added that “the Coca-Cola system also announced progress against its water efficiency goal. The company and its bottling partners improved water use efficiency by 2.5 percent from 2014 to 2015, adding to a cumulative 27 percent improvement since 2004.”

It also noted that “the Coca-Cola system returned an estimated 191.9 billion liters of water to nature and communities in 2015 through community water projects, equaling the equivalent of 115 percent of the water used in Coca-Cola’s beverages last year.”

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Performance in fiscal 2Q16

Coca-Cola reported net operating revenues of $11.5 billion, a fall of 5.7% from net operating revenues of $12.2 billion in fiscal 2Q15. Net operating revenues from the Eurasia and Africa, Europe, Latin America, Asia-Pacific, and Bottling Investments segments fell by 5.6%, 1.7%, 3.7%, 2.6%, and 12.1%, respectively. The net operating revenues from North America rose by 2.2% between fiscals 2Q15 and 2Q16. The company’s gross profit margin and operating income rose by 1.8% and 16.0%, respectively. Its net income and EPS (earnings per share) rose to $3.4 billion and $0.79, respectively, in fiscal 2Q16, compared with $3.1 billion and $0.71 in fiscal 2Q15.

Coca-Cola’s total cash, cash equivalents, and short-term investments and inventories rose by 37.2% and 3.4%, respectively, between fiscals 4Q15 and 2Q16. Its current ratio and long-term debt-to-equity ratio fell to 1.21x and 1.09x, respectively, in fiscal 2Q16, compared with 1.24x and 1.10x in fiscal 4Q15.

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Quarterly dividends

Coca-Cola declared a regular quarterly dividend of $0.35 per share on its common stock. The dividend will be paid on October 3, 2016, to shareholders of record as of September 15, 2016.

Projections

The company made the following projections for fiscal 2016:

  • organic revenue growth of 3%
  • comparable currency neutral income before taxes growth of 6%–8%
  • comparable EPS down 4%–7%
  • effective tax rate of 22.5%
  • share repurchases of $2.0 billion–$2.5 billion

In the next part of this series, we’ll discuss Post Holdings (POST).

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