The Coca-Cola Company (KO) is extremely popular worldwide. Its non-alcoholic beverages, snacks, and other edible items have reached the globe's farthest corners.
The blue-chip stock has been an investor favorite as it has created incredible wealth over the past few decades. Famous investor Warren Buffett has owned the stock for over 30 years and said he would never sell it.
KO has been a dependable dividend payer over the past few decades. On October 20, 2022, the company declared a dividend of 44 cents payable to shareholders on December 15, 2022. Its financial strength can be gauged from its 60 years of consecutive dividend growth.
Its annual dividend of $1.76 yields 2.75% on the current share price. The company’s dividend payouts have increased at a 3.2% CAGR over the past three years and a 3.5% CAGR over the past five years.
Although inflation eased for the second consecutive month, recession fears still linger. Investors looking for a recession-resistant stock could consider KO due to the almost inelastic demand for its products. Despite the macroeconomic headwinds, KO delivered impressive third-quarter results.
KO’s revenue beat analyst estimates by 5.7%, and its EPS beat the consensus estimate by 8.3%. In addition, the company has guided for organic (non-GAAP) revenue growth of 14% to 15% for fiscal 2022. It also expects comparable EPS (non-GAAP) growth of 6% to 7% and a free cash flow of approximately $10.50 billion.
The stock has gained 8.1% in price year-to-date and 10.8% over the past year to close the last trading session at $63.99.
Here’s what could influence KO’s performance in the upcoming months:
Robust Financials
KO’s non-GAAP net operating revenues increased 10.2% year-over-year to $11.06 billion for the third quarter ended September 30, 2022. Its non-GAAP gross profit increased 6.5% year-over-year to $6.54 billion. The company’s non-GAAP net income increased 6.7% year-over-year to $3.01 billion. Also, its non-GAAP EPS came in at $0.69, representing an increase of 6.2% year-over-year.
Favorable Analyst Estimates
Analysts expect KO’s EPS for fiscal 2022 and 2023 to increase 7.4% and 2% year-over-year to $2.49 and $2.54, respectively. Its revenue for fiscal 2022 and 2023 is expected to increase 10.5% and 2.9% year-over-year to $42.72 billion and $43.95 billion, respectively.
High Profitability
In terms of the trailing-12-month gross profit margin, KO’s 58.49% is 84.8% higher than the 31.66% industry average. Likewise, its 31.96% trailing-12-month EBITDA margin is 164.4% higher than the industry average of 12.09%. Furthermore, the stock’s 28.90% trailing-12-month EBIT margin is 249.4% higher than the industry average of 8.27%.
POWR Ratings Show Promise
KO has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. KO has a B grade for Quality, consistent with its high profitability.
It has an A grade for Sentiment, in sync with its favorable analyst estimates. Its 0.59 beta justifies its B grade for Stability.
KO is ranked #16 out of 33 stocks in the A-rated Beverages industry. Click here to access KO’s ratings for Growth, Value, and Momentum.
Bottom Line
KO’s stock is trading above its 50-day and 200-day moving averages of $59.70 and $61.72, respectively, indicating an uptrend. KO’s impressive dividend history substantiates its financial strength. Despite the macroeconomic uncertainty, the inelastic demand for its products allowed KO to report strong earnings. In addition, KO has guided for a strong finish to this year.
With a recession expected next year, blue-chip stock KO could be a good choice for investors because of its high profitability, strong balance sheet, and reliable dividends.
How Does The Coca-Cola Company (KO) Stack up Against Its Peers?
KO has an overall POWR Rating of B, equating to a Buy rating. You might want to consider investing in the following Beverages stocks with an A (Strong Buy) or B (Buy) rating: Kirin Holdings Company, Limited (KNBWY), Suntory Beverage & Food Limited (STBFY), and Compañía Cervecerías Unidas S.A. (CCU).
KO shares were trading at $64.42 per share on Wednesday afternoon, up $0.43 (+0.67%). Year-to-date, KO has gained 12.02%, versus a -13.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
1 Blue-Chip Stock That's Been Paying Dividends for Decades StockNews.com
