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Coke's 4Q Growth and Margins Improve, but Shares Look Fairly Valued

Coke delivered a solid quarter, but our long term-assumptions for the firm remain in place, writes Morningstar‘s Adam Fleck.


 Coca-Cola's (KO) fourth-quarter results were in line with our expectations, and we don't plan to significantly alter our long-term projections for the wide-moat firm. We may slightly raise our $42 fair value estimate to account for the time value of money since our last update, but we still believe the shares look fairly valued at their current market price.

Coke reported a solid quarter, with carbonated volume gains from a year ago in emerging and developing markets (including 3% in Eurasia and Africa, 1% in Latin America, and 3% in Asia Pacific) highlighting the growth potential of these regions. We continue to believe the firm can drive sales growth here back to mid- to high-single-digit levels over the long run as consumers increase their beverage consumption levels (which largely remain well below those of developed countries) and Coke realizes increased revenue per liter; success in Brazil and other southern Latin America countries with price increases this quarter (total segment price/mix was up 10% year over year) is especially indicative of this potential.

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

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