KO Stock Coca-Cola: Due Diligence – SEC Filings

KO Stock – What Investors Should Know About Coca-Cola Co.

The Coca-Cola Co. (KO Stock) is a beverage concentrate and syrups retailer with Coca-Cola as the company’s flagship product and key brand. The Coca-Cola Company is a beverage retailer, manufacturer, and marketer of non-alcoholic beverage concentrates and syrups. The company’s flagship product is Coca-Cola, but it offers more than 500 brands in over 200 countries or territories and serves 2.1 bn servings each day. The Coca-Cola Company is headquartered in Atlanta, Georgia. Its stock is listed on the New York Stock Exchange (NYSE). Beverage products bearing the Coca-Cola trademarks have been sold in the United States since 1886.

The Coca-Cola Company is a total beverage company owning or licensing and marketing numerous beverage brands. The company groups them into the following categories: Trademark Coca-Cola; sparkling flavors; hydration, sports, coffee, and tea; nutrition, juice, dairy, and plant-based beverages; and emerging beverages. Coca-Cola Co. owns and markets five of the world’s top six nonalcoholic sparkling soft drink brands. These are Coca-Cola, Sprite, Fanta, Diet Coke, and Coca-Cola Zero Sugar. The company makes branded beverage products available to consumers throughout the world through its consolidated bottling and distribution operations. In addition, the company utilizes a network of independent bottling partners, distributors, wholesalers, and retailers. Beverages bearing trademarks owned by or licensed to the Company account for 2.1 billion of the approximately 63 billion servings of all beverages consumed worldwide every day.

“We believe our success depends on our ability to connect with consumers by providing them with a wide variety of beverage options to meet their desires, needs, and lifestyles. Our success further depends on the ability of our people to execute effectively, every day. We are guided by our purpose, which is to refresh the world and make a difference, and rooted in our strategy to drive net operating revenue growth and generate long-term value” (Source: coca-colacompany.com)

KO Stock SEC Filings – Annual Reports – Financials

Coca-Cola Co is incorporated in the state of Delaware. Coca-Cola Co is primarily in the business of beverages. For financial reporting, their fiscal year ends on December 31st. This page includes all SEC registration details as well as a list of all documents (S-1, Prospectus, Current Reports, 8-K, 10K, Annual Reports) filed by Coca-Cola Co.

Coca-Cola is the world’s largest nonalcoholic beverage company. It owns and markets some of the most popular carbonated beverage brands, including Coke, Fanta, and Sprite. Also, nonsparkling brands like Minute Maid, Georgia Coffee, and Glaceau. In terms of operations, the company concentrates its manufacturing efforts early in the supply chain. To this end, it produces the concentrate (or beverage bases) for its drinks. These are then processed and distributed by its network of over 100 bottlers. In 2018, concentrate operations accounted for 85% of the company’s unit case volume. Coca-Cola recently increased its presence in the hot beverage market by acquiring Costa, a leading coffee company in the United Kingdom. The majority of the company’s revenue is generated abroad.

KO Stock Dividends & Buybacks

The Coca-Cola Company Declares Quarterly Dividend, Payable on Dec. 15, 2022

The Coca-Cola Company declared a dividend of 44 cents per common share. The dividend is payable on Dec. 15, 2022, to shareowners of record of the company as of the close of business on Dec. 1, 2022.

Going forward, the company’s free cash flow continues to fund a growing dividend. The dividend most recently edged up 5% for 2022 with the dividend yield currently standing at 2.87%. Given that the company has increased that payment in each of the last 60 years, it seems almost certain that Coke’s dividend will be significantly higher in 2025 than it is today. Automatic reinvestments of those payments should support even stronger returns for investors who choose to simply hold this stock for five years or longer.

KO Stock Forecast 2025

As people stayed at home during the pandemic, Coca-Cola sales and KO Stock prices lagged. However, the company has made a comeback and recently raised its outlook. Nevertheless, it has consistently increased its dividend and investors can expect this trend to continue. Coca-Cola (KO Stock) shares have outperformed the market significantly in 2022. Throughout the majority of this turbulent year, investors saw the beverage giant post accelerating sales growth and strong profits. However, real market-beating returns are only available to shareholders who invest for several years rather than a few months.

What will Coca-Cola’s business look like in 2025? Long-term growth in the beverage industry is likely to be in the mid-single digits. However, the company’s dominant position could allow it to achieve double-digit annual revenue growth.

The earnings outlook is even more promising. Coca-Cola is expanding into higher-margin markets such as energy drinks, alcoholic beverages, and recreational cannabis. Even though it currently leads the industry, these factors should help it maintain its operating margin. Coke turned 30% of its revenue into operating profit this quarter. This result is about the same as investors saw a year ago. Executives intend to strike a balance between expanding into new markets and products and supporting the company’s core beverages, which have been popular for decades.

“We are investing in our strong portfolio of brands, which is a cornerstone of our ability to deliver long-term value for our stakeholders.” (Source: Coca-Cola CEO James Quincey, from a late October 2022 earnings report)

KO Stock Forecast & Cash flow

Cash flow trends are arguably the most reliable indicator that Coke will deliver strong returns in the coming years. Even after spending approximately $2 billion on its massive global selling infrastructure, the company expects to generate approximately $11 billion in free cash flow in 2022.

KO Stock Risk Factors

Positive Factors

Earnings are forecast to grow 6.93% per year. Earnings grew by 12.7% over the past year.
Dividend Payout – Coca-Cola pays a reliable dividend of 2.9%.
Trading at good value vs. peer average Price-To-Earnings ratio and trading below the calculated fair Price-To-Earnings ratio.

Negative Factors

Debt – The company has a high level of debt
Insider trading – Significant insider selling over the past 3 months

Increases in costs, disruption of supply, or shortages of energy or fuel could affect KO Stock price and Coca-Cola Co profitability.

Distributing and delivering beverage products to customers requires Coca-Cola to operate a large fleet of trucks and motor vehicles. Furthermore, the company uses a significant amount of electricity, natural gas, and other energy sources to run production plants. Also, to run the bottling plants and distribution facilities employed through its consolidated bottling operations. An increase in the price, disruption in supply, or scarcity of fuel and other energy sources could increase operating costs. Particularly in countries where manufacturing plants or markets where consolidated bottling operations operate. Events such as natural disasters, power outages, and extreme weather can impact costs. Moreover, government regulations, taxes, policies, or programs to reduce greenhouse gas emissions and address climate change. The company’s independent bottling partners also run large fleets of trucks and other motor vehicles. They are subject to the same threats and risks to distribute and deliver beverage products to their own customers.

Increases in the cost or disruption of supplies or shortages of ingredients, other raw materials, packaging materials, aluminum cans, and other containers could harm Coca-Cola’s business.

Coca-Cola and its bottling partners use various ingredients in its business. Also, other raw materials such as coffee, orange, and other fruit juice and juice concentrate. In addition, packaging materials such as PET, bio-based PET, and recycled PET for bottles, aluminum cans, and other containers. The prices of these ingredients, other raw materials, packaging materials, aluminum cans, and other containers fluctuate. Prices are influenced by market conditions, governmental actions, climate change, and other factors beyond the company’s control. Substantial increases in the prices of its bottling partners’ ingredients, other raw materials, packaging materials, etc. influence their costs. Often, these increases cannot be recouped through increases in the prices of finished beverage products. As a result, these increase Coca-Cola’s and its bottling partners’ operating costs and reduce profitability. Moreover, these increases could affect affordability in some markets and reduce sales.

Adverse weather conditions may affect the supply of other agricultural commodities from which key ingredients for our products are derived.

Drought conditions, for example, in certain parts of the United States or other major corn-producing areas of the world, may reduce corn supply, resulting in HFCS shortages and higher prices. Weather variability and greening disease have an impact on the supply and quality of orange juice and concentrate. Both of these ingredients are important raw materials for the company’s business. Freezing temperatures or hurricanes in central Florida, in particular, may result in shortages and higher prices. Especially vulnerable is orange juice and orange juice concentrate throughout the industry. Furthermore, a greening disease reduces the number of citrus trees while increasing grower costs and prices.

Coca-Cola may not be able to increase prices to fully offset inflationary pressures

Costs for materials and labor may have a negative impact on financial conditions or the results of operations. The company relies on raw materials, packaging materials, plant labor, and transportation providers in manufacturing and bottling operations. The costs of these inputs required for the production and distribution of its products have risen dramatically in 2021 and 2022. Furthermore, many of these items are subject to price fluctuations due to a variety of factors. For example, market conditions, geopolitical developments, raw material demand, weather, growing and harvesting conditions, climate change, energy costs, currency fluctuations, supplier capacities, governmental actions, import and export requirements (including tariffs), and other factors beyond the company’s control. The company anticipates that inflationary pressures on input and other costs will continue to have an impact in 2022 and beyond.

Efforts to offset these cost pressures, such as raising the prices of some products, may be futile. Ultimately, increased product prices may simply result in lower sales volume. Consumers may be less willing to pay a price differential for branded products and may opt for lower-priced alternatives. Or, forego some purchases entirely. If price increases are insufficient to offset higher costs adequately or timely, and/or if they result in significant decreases in sales volume, the company’s financial condition or results of operations may suffer. Furthermore, the company may be unable to offset cost increases through productivity initiatives or commodity hedging.

KO Stock News

Third quarter 2022 earnings: EPS and revenues exceed analyst expectations (October 2022)

The company reported higher-than-expected third-quarter earnings and sales after raising prices to offset the effects of inflation. Coca-Cola (KO stock ticker) reported 69 cents per share on $11.1 billion in revenue for the third quarter. This was up from 65 cents per share and $10 billion in revenue in the same period last year. FactSet polled analysts, who expected earnings of 64 cents per share on $10.5 billion in revenue for the third quarter. Third-quarter 2022 outcomes: Revenue surpassed analyst expectations by 5.7%. Earnings per share (EPS) also exceeded analyst expectations by 7.3%.

EPS: US$0.65 (up from US$0.57 in 3Q 2021).
Revenue: US$11.1b (up 10% from 3Q 2021).
Net income: US$2.83b (up 14% from 3Q 2021).
Profit margin: 26% (in line with 3Q 2021).

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KO Stock Coca-Cola: Due Diligence – SEC Filings – Risk Factors