Here's Why Coca-Cola (KO) Stock Rose Today

Coca-Cola (KO) shares closed Tuesday's trading session up following Moody's positive note on the beverage company.
By U-Jin Lee ,

NEW YORK (TheStreet) -- The Coca-Cola Co. (KO) - Get Report  shares closed Tuesday's trading session up 0.55% to $41.77 following Moody's positive note on the beverage company. 

The credit rating agency said that the company maintains a robust credit profile despite a rise in leverage.

"The drivers of Coke's increase in leverage include foreign-currency translation, which masks the fact that earnings and profits have been rising on a currency neutral basis, and Coke's substantial unfunded pension liability, which will likely decrease when interest rates rise," said Linda Montag, Moody's Senior VP.

Overall, Moody's said that the increase in leverage is temporary. 

Based in Atlanta, GA, Coca-Cola manufactures and distributes various nonalcoholic beverages worldwide.

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 several positive factors, 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, increase in stock price during the past year and expanding profit margins. 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.
  • After a year of stock price fluctuations, the net result is that KO's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.9%. 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.
  • 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.
  • 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
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