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Coca-Cola Co KO

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Morningstar’s Analysis

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Recovery for Coke Will Be Prolonged, but Strategic Initiatives Sound and Should Support Valuation

Analyst Note

| Nicholas Johnson, CFA |

Wide-moat Coca-Cola’s third-quarter earnings were bound to be fraught, as investors would not only be looking for details about results and outlook but also insight into the slew of recent strategic announcements (the internal reorganization and partnership with no-moat Molson Coors for Topo Chico Hard Seltzer being the most prominent). Ultimately, the results were solid (ahead of CapIQ consensus expectations on both the top and bottom lines), and while it’s still unclear when coronavirus-induced pressures will reach their coda, the firm’s strategic initiatives support our confidence in its long-term prospects. We don’t plan to change our $54 fair value estimate, and despite rallying meaningfully from the lows in March, the shares still strike us as modestly undervalued.

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Company Profile

Business Description

Coca-Cola is the largest nonalcoholic beverage entity in the world, owning and marketing some of the leading carbonated beverage brands, such as Coke, Fanta, and Sprite, as well as nonsparkling brands, such as Minute Maid, Georgia Coffee, and Glaceau. Operationally, the firm focuses its manufacturing efforts early in the supply chain, making the concentrate (or beverage bases) for its drinks that are then processed and distributed by its network of more than 100 bottlers. Concentrate operations represented 85% of the company’s unit case volume in 2018. Coca-Cola recently expanded its presence in the hot-beverage market through its acquisition of Costa, a leading coffee company in the United Kingdom. The firm generates most of its revenue internationally.

One Coca-Cola Plaza
Atlanta, GA, 30313
T +1 404 676-2121
Sector Consumer Defensive
Industry Beverages - Non-Alcoholic
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 86,200