Skip to Content

We Remain Encouraged by Coke’s Cash Flow

Improved volume and pricing has helped Coke grow operating income despite currency and other headwinds, says Morningstar’s Adam Fleck.


We're keeping our $44 fair value estimate and wide moat rating for  Coca-Cola (KO) following second-quarter results. The firm continued to see revenue decline year over year, but this was due entirely to currency headwinds and structural changes in the business (largely the firm's refranchised bottling operations); concentrate volume grew 2% and price and mix added 2% to the top line.

Although the shifting Easter holiday benefited the second quarter this year versus last, recent marketing efforts also seem to be taking hold, as systemwide unit case volume increased 2% during the first half of 2014. This figure falls at the low end of our long-run forecast, but we're encouraged that Coke seems to be making a concerted effort to drive better pricing in the North American market. As evidence, the core carbonated soft drink business saw price/mix increase 3%--following a 2% increase in the first quarter--alongside market share gains, and the region's weakness in juice stemmed from major price hikes to offset increased commodity costs. Volume growth was relatively solid in other geographies, with share gains in Eurasia and Africa, stabilized performance in Europe, and 9% volume growth in China.

Adam Fleck does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.