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Coca-Cola 2012 3Q Financial Analysis

|Includes:The Coca-Cola Company (KO)

Companies 2012 3Q results are slightly positive. Overall past 5 years show stable revenue and Net income growth. If comparing 3Q accumulative last 12 month results (2012 9 months+20114Q) with 2011Y revenue has increased from 46,5 bn.$ to 47,6 bn.$ or Δ+2,2%. Net income has increased from 8,6 bn.$ to 8,8 bn.$ or Δ+2,7%. This growth is quite good if taking into account overall world economy growth slowdown. Larger Revenue and Net Income growth at Y2011 was due to CCE bottling company acquisition.

Billion $RevenueNet Income20082009201020112012Q3015304560

Coca-cola main income is from its original North America. There company sale almost 1/2. Since US economy is recovering further growth can be expected. In 2010 companies acquired bottling segments has 2,2 bn.$ or ~17% of total group sales. In general companies results are slightly positive.

Revenue by GeographyNorth AmericaPacificEuropeLatin AmericaEurasia & AfricaBottling44.5%17.3%

Companies balance sheet has issues with equity level. Which has droped quite a lot from good 51% at Y2008 and Y2009 to only 38% now. Another issue is Return on equity. It is stable 27%. But knowing that Equity level has decreased quite a lot that is a bad thing. Major decrease was in Y2010, since then equity level has not improved due to increased level of profit sharing with companies shareholders trough share repurchase and dividends. If at Y2008-2009 68-69% of Net Income was spent on Dividends then in 2010-2011 it increased to 75% and 84% so company is basically paying out everything that it earns and not leaving a lot in the company, which is not good for companies long term growth. At first 9 month of Y2012 this level stays at high 80%. On the other hand its not over 100% like in some other companies. At Y2010 company has acquired major bottler CCE with its quite large amount of debts. Although this has increased companies diversification but its ratios has worsened. It would be nice to see company accumulating more equity and deceasing debt level to return into stable balance sheet like it was at Y2009. In general companies balance structure is bit risky.

Return onEquityEquity level20082009201020112012Q30.20.30.40.50.6

Share value:

Equity / share 33,2 bn.$ 4,486 bn. 7,4 $/sh.
Market value 37,1 $ +29,7$ 15,1 years
Year Net income before Depreciation 8,8 bn.$ +1,96$/sh. 5,0%
Click to enlarge

Companies share book value is ~7,4$. Current market price is ~37$ which shows that market is paying ~29,7$ more, or more then 15 years of Net Income, which is 8,8 bn.$. This is quite a lot taking into consideration that companies balance structure is a bit risky. Share profitability (Share market price/Net income before Depreciation) is only 5,0% which is low. The only risk lowering factor is stable sector - consumer good production.

Company at the moment pays 1,01$/share annual dividends (0,255$/quarter) before tax or2,7% investment yield, which is a bit low. Since growth is very minimal dividend increase should be minimal. In general share evaluation is quite high, due to that its profitability is low and also taking into consideration a bit risky balance sheet.

Stocks: KO