Coca-Cola (KO) Stock Declines Amid Plan to Enter India's Pure Dairy Sector

Coca-Cola (KO) stock is falling in afternoon trading on Monday, as the soda-maker reportedly plans to join India's pure dairy segment.
By Rachel Graf ,

NEW YORK (TheStreet) -- Coca-Cola (KO) - Get Report stock is sliding 0.83% to $42.79 in afternoon trading on Monday, as the Atlanta-based beverage maker prepares to enter India's pure dairy market as soon as January, The Economic Times reports.

Coca-Cola plans to sell bottles of its Vio beverage in India. The drink is currently sold in the U.S. as a carbonated, milk-based beverage, but will be sold in India as a flavored milk drink without carbonation, according to the Times. 

Carbonated drink sales have been struggling throughout the past five quarters, whereas the packaged dairy market is expanding by roughly 15%, the Times adds.

"It is worth the challenge because if it works, it can be a game changer for Coca-Cola," Devendra Chawla, group president, food and FMCG, at retailer Future Group, told the Times. "Unlike colas, dairy is a traditional, culturally deep-rooted and high-involvement daily consumption category and could bring Coca-Cola into the daily grocery consumption basket, bringing its brands very close to the Indian consumer."

Separately, TheStreet Ratings team rates COCA-COLA CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate COCA-COLA CO (KO) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and reasonable valuation levels. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Beverages industry and the overall market, COCA-COLA CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for COCA-COLA CO is rather high; currently it is at 64.16%. Regardless of KO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KO's net profit margin of 12.68% compares favorably to the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.1%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • COCA-COLA CO's earnings per share declined by 31.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, COCA-COLA CO reported lower earnings of $1.59 versus $1.90 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus $1.59).
  • You can view the full analysis from the report here: KO

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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