"Much of Coke's (KO) recent volume weakness can be traced to temporary factors that should abate next year," writes Jack Hough, who thinks shares of the world's largest beverage company could gain 20% next year.
The "key" for KO, says Hough, citing Janney analyst Jonathan Feeney, is the 700M people that will join the middle class over the next seven years. This could cause "soft-drink sales to double" over the next decade or so.
Hough goes on to cite a number of sell-siders including RBC's Nik Modi who notes KO's "share price implies just 2.3% compounded-yearly growth in earnings before interest and taxes through 2020, about four percentage points below the company's long-term pace," and Wells Fargo's Bonnie Herzog who says a spin-off of the company's bottling operations "would raise profit margins and unlock a higher valuation for the stock."
Apples to apples (perhaps): Barron's says KO trades at a 4% premium to Pepsi (PEP) — that premium has at times reached 20%.