{"id":15342,"date":"2024-02-12T07:42:06","date_gmt":"2024-02-12T13:42:06","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=15342"},"modified":"2024-02-12T07:42:06","modified_gmt":"2024-02-12T13:42:06","slug":"earnings-preview-coca-cola-ko-another-stagnating-brand","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=15342","title":{"rendered":"Earnings Preview: Coca-Cola (KO) &#8211; Another Stagnating Brand ?"},"content":{"rendered":"<ul>\n<li>Tuesday, February 13th (BMO): Coca-Cola (KO)<\/li>\n<li>Wednesday, February 14th, (BMO): CME (CME)<\/li>\n<li>Wednesday, February 14th (AMC): Cisco Systems (CSCO)<\/li>\n<li>Thursday, February 15th: (AMC): Coinbase (COIN):<\/li>\n<li>Deere (DE) sometime this week<\/li>\n<\/ul>\n<p>BMO &#8211; before market open<\/p>\n<p>AMC &#8211; after market close<\/p>\n<p><em><strong>Coca-Cola (KO):<\/strong> <\/em>KO reports before the opening bell on Tuesday, February 13, 2024.<\/p>\n<p>Here&#8217;s the consensus estimates:<\/p>\n<ul>\n<li><em><strong>EPS:<\/strong><\/em> $0.47 or 9% yoy growth<\/li>\n<li><em><strong>Rev:<\/strong> <\/em>$10.67 bl or 5% yoy growth<\/li>\n<li><em><strong>Operating inc:<\/strong> <\/em>$2.4 bl or 6% yoy growth<\/li>\n<\/ul>\n<p>In Q3 &#8217;23, KO printed 9% revenue growth, 7% operating income growth and 7% EPS growth. Case volume rose just 2%, but this was after a 9% price increase. Coke like so many companies went through a tough time in the post Covid years, mainly 2022 and early 2023, but the carbonated soft drink giant has rebounded, pushing through price increases, which are now finally complete.<\/p>\n<p>Here&#8217;s my biggest worry about KO (the stock): the quality of earnings isn&#8217;t the best.<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2024\/02\/KOcashflowtonetincome21124.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-15346\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2024\/02\/KOcashflowtonetincome21124-300x13.png\" alt=\"\" width=\"300\" height=\"13\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2024\/02\/KOcashflowtonetincome21124-300x13.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2024\/02\/KOcashflowtonetincome21124-1024x44.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2024\/02\/KOcashflowtonetincome21124-150x6.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2024\/02\/KOcashflowtonetincome21124-768x33.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2024\/02\/KOcashflowtonetincome21124-1536x66.png 1536w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2024\/02\/KOcashflowtonetincome21124-1600x69.png 1600w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2024\/02\/KOcashflowtonetincome21124.png 1818w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Readers have to click on the above spreadsheet to expand the spreadsheet, but for the last 5 years there has only been a handful of quarters where cash-flow has exceeded net income for Coca-Cola, which is not really a positive.<\/p>\n<p>This may come as a surprise to readers, but for many SP 500 components, cash-flow typically exceeds net income (meaning cash-flow per share is typically greater than earnings per share), particularly with businesses with depreciation expense. Industrial, retail, certainly technology, etc.<\/p>\n<p>KO spun-off the bottling operating starting in the middle part of last decade, which was supposed to boost margins and make the business less capital intensive (which it did), but cash-flow has really not improved very much.<\/p>\n<p>While James Quincey has tried to be innovative (launched their first alcoholic beverage in the last year), the fact is the company moves at a snail&#8217;s pace. After modeling KO since the late 1990&#8217;s, it seems at times to act like a government bureaucracy. Coke has incredible brand strength and appeal, and you&#8217;d think management could leverage that into other areas, but it hasn&#8217;t happened.<\/p>\n<p>The Super Bowl commercials reflected a number of &#8220;emerging soft drinks&#8221; like Poppi (?), but the mainstays like Coke and Pepsi passed on the event. Not sure how to factor that into the fundamental valuation picture for KO.<\/p>\n<p>Some final data points on KO relative to other staples:<\/p>\n<p>Total return since 1\/1\/2000 (through12\/31\/2003):<\/p>\n<ul>\n<li><em><strong>Pepsi:<\/strong> <\/em>+9.43%<\/li>\n<li><em><strong>SPXTR:<\/strong><\/em> +7.03%<\/li>\n<li><em><strong>Walmart:<\/strong><\/em> +5.35%<\/li>\n<li><em><strong>Coca-Cola:<\/strong><\/em> +5.83%<\/li>\n<li>(Return data sourced from YCharts)<\/li>\n<\/ul>\n<p>Total return since 1\/1\/2010 (through 12\/31\/23):<\/p>\n<ul>\n<li><em><strong>SPXTR:<\/strong><\/em> +13.12%<\/li>\n<li><em><strong>Pepsi:<\/strong><\/em> +10.78%<\/li>\n<li><em><strong>Walmart:<\/strong><\/em> 10.46%<\/li>\n<li><em><strong>Coca-Cola:<\/strong><\/em> 8.63%<\/li>\n<\/ul>\n<p>Clients own a 1% position in the stock, but Coke is a perennial underperformer. Ultimately, KO may be swapped for another staple, possibly Walmart (WMT). (Walmart report their fiscal Q4 &#8217;24 next week.)<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Tuesday, February 13th (BMO): Coca-Cola (KO) Wednesday, February 14th, (BMO): CME (CME) Wednesday, February 14th (AMC): Cisco Systems (CSCO) Thursday,&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[67,104,318,43],"tags":[],"class_list":["post-15342","post","type-post","status-publish","format-standard","hentry","category-cme","category-coca-cola-ko","category-coinbase-coin","category-csco"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/15342","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15342"}],"version-history":[{"count":10,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/15342\/revisions"}],"predecessor-version":[{"id":15353,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/15342\/revisions\/15353"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15342"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15342"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15342"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}