This Day On The Street
Continue to site right-arrow
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
TheStreet Open House

Coca-Cola Needs Less Fizz in Its Products to Get More in Its Stock

Stocks in this article: KO PEP BRK.B



Even more distressing is Coke's net income, which plunged over 8% from the year-ago quarter to $1.7 billion. In the plus column, revenue rose 4% and operating income was reported as having risen 6%. This isn't very comforting when one considers that its international soda sales fizzled to virtually unchanged and were down 3% in North America.

As we look at the five-year price chart of Coca-Cola imagine how Warren Buffett's Berkshire Hathaway (BRK.B), which as of Dec. 31 owned over 9% of the outstanding Coke shares, must be feeling about now. By the way, 9% of the outstanding shares equals more than $16 billion worth.

KO Chart
KO
data by YCharts

Since Berkshire has owned shares of Coca-Cola for many years its return on investment has been excellent, especially since 2009. But look at that orange line, the trailing 12-month (TTM) return on invested capital. That alone would make a big investor gulp, with or without a mouthful of Diet Coke Slurpee.


Among shareholders there's plenty of concern the company isn't doing enough to add products and diversify away from generating most of its sales from beverages.

If it doesn't take a hint from PepisCo's playbook, the shares may have limited upside for the time being. Selling at a forward (one-year) PE of almost 17 times earnings also continues to give it the look of a stock that isn't a bargain.

Add to that the limited hopes for future progress with its sales growth and the stock's estimated average one-year price target of over $43.92 (according to Yahoo! Finance) seems like a stretch.

On a positive note, the biggest shareholders' patience is starting to fizzle faster than an opened can of Coke, and if an activist investor or two shakes things up a bit the upside "explosion" may be similar to shaking a bottle of Cherry Coke and suddenly popping the cap. You get the picture.

At the time of publication the author had positions in KO and PEP.



This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Google+

Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link 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

Jim Cramer's protégé, 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
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!

Markets

DOW 17,387.21 -291.49 -1.65%
S&P 500 2,029.55 -27.54 -1.34%
NASDAQ 4,681.4970 -90.2660 -1.89%

Partners Compare Online Brokers

Free Reports

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