This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Coke Deal Was Pricey but Right

Even if Coca-Cola (KO) is paying a high price for enhanced-water maker Energy Brands, analysts appear to believe the purchase will be worth it.

The cola wars of yesteryear have given way to a battle for the healthier and freer-spending consumer, one for whom tap water will no longer do. Even ordinary -- if it can be called that -- bottled water finds itself facing ever stiffer competition from the likes of Energy Brands' convenience-store staple Vitaminwater.

New options in the sports-drink category are constantly being churned out, but at the moment the neighborhood bully is PepsiCo (PEP), whose offerings include Gatorade and Propel Fitness Water.

Coca-Cola, wanting a bigger piece of the action, said Friday that it will buy Energy Brands, which does business as Glaceau, for $4.1 billion in cash. Judy Hong of Goldman Sachs wrote in a research report that "though we think the purchase price is too high, we also see the deal as a moderate positive."

Erin Ashley Smith of Argus Research agrees that the terms seem inflated but could still pay off. "While the acquisition price appears high, we think it is justified; the Glaceau brands are in fast-growing, high-margin channels."

An AC Nielsen report states that both water and sports drinks grew at double-digit rates between 2004 and 2006, and Coca-Cola clearly expects beverages of these types to continue serving as strong alternatives to soda.

"These categories of water and energy drinks are expected to make up a large portion of the beverage industry's volume and gross profit in North America through 2010," the company said.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs