This Day On The Street
Continue to site
ADVERTISEMENT
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

Will Coca-Cola Ever Go Flat?

NEW YORK ( TheStreet) -- The term "untouchable" has several meanings on the stock market. There's the reference that describes companies that you should never touch, regardless of how cheap the stock looks.

Then there are stocks that somehow never get cheap. It is as if they have become immune to criticism, shielded from the market's punishment regardless of how underwhelming their performances might have been.

This would seem to describe Coca-Cola (KO - Get Report), whose business, by its own standards, no longer seems as bubbly. I'm not going to try to make excuses for Coca-Cola. But there are a lot of things at play here. Contrary to popular opinion, I don't believe the company's recent decline in revenue is the result of losing share to rival Pepsico (PEP).

The fact is, volume in the soft drink industry has been down across the board -- neither Pepsi or Nestle (NSRGY) have been no exception. But the extent of Coca-Cola's volume struggles, which produced just 1% year-over-year growth, was a disappointment. This was 2% lower than Street expectations, which had already been revised lower more than a month prior to the report.

However, as has been the case for quite some time, Coca-Cola's "flat" performance really didn't seem to matter. The stock, in fact, which has been up by as much as 15% for the year to date, went up by more than 2% in the days following the earnings report.

The reason is simple. Unlike most companies, Coca-Cola has shown an uncanny ability to "struggle" and still grow market share at the same time.

This is a quality that is shared by other iconic brands like McDonald's (MCD) and Nike (NKE). Coca-Cola is safe -- hence its "untouchable" status. Essentially, investors have had no problems paying any sort of premium that Coca-Cola commands, which is why the company never trades at any price below fair value.

I won't argue that this level of trust is has been well earned. But I do wonder how long this can continue, especially with Coca-Cola now posting revenue declines in North America and Europe, which were both down 1% and 4%, respectively. The good news here is that the company has been able to offset its North American struggles with better volume growth in emerging markets like Africa and Latin America.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
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!
SYM TRADE IT LAST %CHG
KO $40.84 -0.11%
AAPL $132.65 1.82%
FB $81.91 0.47%
GOOG $555.39 -1.70%
TSLA $231.55 6.01%

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs