Coca-Cola (KO) Stock Rises on Leveraged Buyout Possibility

NEW YORK (TheStreet) -- Shares of Coca-Cola  (KO) ticked up 0.26% to $44.33 in afternoon trading Thursday after Nomura Securities suggested the beverage manufacturer could be the target of a leveraged buyout.

The firm posited the idea after Brazil's 3G Capital began raising significant funds for a takeover in the U.S. food and beverage market, according to Forbes. The article cited Brazilian news magazine Veja, which reported the company has raised approximately $2.5 billion of the $4 billion to $5 billion it plans to raise.

Bernstein also suggested Thursday that Berkshire Hathaway  (BRK.A) could construct a deal with Coca-Cola similar to its recent purchase of Duracell from Procter & Gamble  (PG) . Under such a deal, Berkshire would acquire Coca-Cola's North American bottling operations, valued at $12.8 billion. Berkshire currently holds a $17.8 billion stake in Coca-Cola.

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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 expanding profit margins, reasonable valuation levels, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • The gross profit margin for COCA-COLA CO is rather high; currently it is at 65.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.65% is above that of the industry average.
  • COCA-COLA CO's earnings per share declined by 11.1% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, COCA-COLA CO reported lower earnings of $1.90 versus $1.96 in the prior year. This year, the market expects an improvement in earnings ($2.05 versus $1.90).
  • KO, with its decline in revenue, slightly underperformed the industry average of 1.0%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: KO Ratings Report

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