Skip to Content

Undervalued Coke Shares May Be Worth a Sip

We believe in Coca-Cola's long-term earnings growth potential, but we plan to lower our fair value estimate after a tough third-quarter.


We are likely to trim our $44 fair value estimate for wide-moat  Coca-Cola (KO) about $1 or $2 to reflect near-term concerns, but overall we believe the company’s revisions to its 2020 vision only delay rather than prevent the long-term high-single-digit earnings growth potential of the business.

The firm reported top-line challenges in its third quarter, with adjusted 1% year-over-year revenue growth reflecting slowing price/mix and volume growth and further foreign currency headwinds. We're encouraged that the company continued to enjoy positive, rational pricing in the core North American sparkling beverage market, and that profitability again improved, but we caution that further top-line headwinds look to threaten this year-over-year margin improvement in the fourth quarter. As such, we continue to forecast Coke’s adjusted earnings per share (including negative currency translation) to be roughly flat versus 2013. Similarly, management estimates that currency-neutral 2015 EPS growth will also be in a mid-single-digit range.

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.