Revenue for the fourth quarter of 2012 was up 4% from 4Q11 at $11.46 billion. Adjusted net income was $2.1 billion resulting in earnings per share of $0.45. At $0.45, EPS beat analysts' consensus estimate by $0.01.
Full year revenue for 2012 was equally strong, up 3% from 2011 at $48.02 billion. Adjusted net income for the full year was $9.2 billion resulting in earnings per share of $2.01.
Since the company's fourth quarter earnings announcement the stock has steadily risen 4.74%.
Details from management's investor presentation at the Consumer Analyst Group of Europe conference revealed further insights into the strong growth of the company.
Management outlined its 2020 Vision goals set forth in 2009 with a focus on doubling global system revenue by the year 2020. In order to achieve this goal the company must have annual volume growth of 3 - 4%, operating income growth of 6 - 8% and earnings per share growth in the high single digits.
In the recent Consumer Analyst Group presentation, management detailed the following metrics for the first three years, which showed significant progress towards its 2020 Vision goals:
- Three-year compound annual growth in volume of 5%
- Three-year compound annual growth in operating income of 10%
- Three-year earnings per share growth of 10%
Management also outlined its strong cash flow growth achievements, resulting from the significant progress towards the goals of the 2020 Vision. Coca-Cola has seen cash flow grow 12% annually over the past three years, increasing from $9.5 billion in 2010 to $11.5 billion in 2012. The company has invested $20 billion in dividends and share repurchases over the past three years. This cash investment has helped the stock price grow from $28.50 at the end of 2009 to $36.25 at the end of 2012.
Management also expects the company's recently announced operating structure changes to help further improve profit margins. Under Coca-Cola's new management structure, the company will consolidate its operations into three business segments which include: 1) Americas, 2) International and 3) Bottling Investments. At the March Consumer Analyst Group of Europe conference, Irial Finan, Coca-Cola's Bottling Investment Group Executive Vice President provided some insight into the company's BIG business.
The Bottling Investment Group is comprised of 15 major bottlers and generates 18% of the company's revenue. In 4Q 2012 bottling revenue was up 6% to $2.09 billion. For the full year, revenue also improved 4% to $8.90 billion.
A core focus in the group continues to be on "spend quality" which helps the company achieve operational excellence through disciplined production spending.
The Bottling Investment Group expects to see market growth in 2013 specifically in Germany, India, China and Brazil which will help the company to grow volume and market share.
First quarter 2013 earnings are scheduled for release on Tuesday, April 16 and should provide further detail on growth in the Bottling Investment Group as well as continued progress towards the company's 2020 Vision.
Given the company's strong 2012 results and the continued progression towards its 2020 Vision, Coca-Cola appears to be a leading stock investment for potential shareholders seeking consumer product allocation in the Dow Jones Industrial Average.
It has a one-year price target1 of $42.60 which further reinforces its investment potential in the current market environment.
1 The price target is derived from Bodie, Kane and Marcus' intrinsic value formula. The intrinsic value formula discounts the projected one-year future cash flow value by the risk-free rate on the one-year Treasury note plus a beta of 0.51 times the market's expected one-year risk premium. The market risk premium assumes stock market appreciation in 2013 to be similar to 2012 and is based on Dow Jones Industrial Average index return.