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Shares of Coca Cola (KO) rose 2.1% after the company reported a strong set of first quarter results.

First Quarter Results

The world's largest soft drink maker reported strong quarterly results. Net income rose 8% to $2.05 billion, while revenues increased 6% to $11.1 billion. Earnings per share came in at $0.89, beating analysts consensus who estimated the company to report $0.87 in profits and $10.8 billion in revenue.

The international division of Coca Cola reported 6% volume growth, while growth in North America was limited to 2%. Favorable exchange rates helped offset rising costs for raw materials which drove up the costs of plastic bottles. The company is on track to realize annual cost savings of $550-$650 million by 2015 on productivity and reinvestment programs. The company saw sluggish growth in Europe on macro-economic concerns, however the Eurasia and Pacific region continued to show high single digit volume growth.

CEO Kent said, "Our first quarter results underscore The Coca-Cola Company's resilience and a long-term focus on quality growth in every region of the world."

Valuation

Coca Cola ended the first quarter with $15.7 billion in cash, short term investments and marketable securities. The company operates with some $17.7 billion in short and long term debt, leaving a net debt position of merely $2 billion.

After today's gains to $74 per share the company is valued at $167 billion which values the company at 3.6 times annual revenues and 20 times 2011's earnings. This compares to its main competitors PepsiCo (PEP) which trades at 1.6 times annual revenues and 16 times earnings, a sizable discount to its main competitor.

Shareholders in Coca Cola receive a quarterly dividend of $0.51 per share for an annual dividend yield of 2.8%

Investment Thesis

Shares in Coca Cola have reached the highest level in the past decade. Only in 1998 shares traded higher, peaking at $86 per share. Steady worldwide revenue growth and fat profit margins have made an investment in Coca Cola worthwhile. Furthermore the company has a history of steady dividend increases.

While the first quarter figures are good shares have had a decent run over the last couple of years. Shares are valued at reasonably high multiples and trade at a sizable premium compared to its main competitor Pepsico. Despite the momentum I am not an aggressive buyer of the shares.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Coca Cola: Decent Results Do Not Make A Screaming Buy

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