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Coca-Cola Still Facing Some Headwinds, But Taking Action

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  • The Coca-Cola Company is the world's largest soft drink company, and also has a sizable fruit juice business.
  • During its Q3 conference call, management announced the expansion of its productivity initiatives and plans to streamline its operations to drive revenue and profit growth.
  • In mid-December, management reiterated its October warning that earnings growth will fall short of the long-term target in both 2014 and 2015.

Linked here is a detailed quantitative analysis of Coca-Cola Company (NYSE:KO). Below are some highlights from the above linked analysis.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value, along with the following four calculations of fair value (see page 2 of the linked PDF for a detailed description):

  1. Avg. High-Yield Price
  2. 20-Year DCF Price
  3. Avg. P/E Price
  4. Graham Number

KO is trading at a premium to all four valuations above. The stock is trading at a 13.2% discount to its calculated fair value of $48.64. KO earned a star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section, there are three possible stars and three key metrics (see page 2 of the linked PDF for a detailed description):

  1. Free Cash Flow Payout
  2. Debt-to-Total Capital
  3. Key Metrics
  4. Dividend Growth Rate
  5. Years of Div. Growth
  6. Rolling 4-yr Div. >15%

KO earned one star in this section, for No. 3 above. KO earned this star for having an acceptable score in at least two of the four key metrics measured. The company has paid a cash dividend to shareholders every year since 1893, and has increased its dividend payments for 52 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high-yield MMA. Two items are considered in this section (see page 2 of the linked PDF for a detailed description):

  1. NPV MMA Diff.
  2. Years to > MMA

KO earned a star in this section for its NPV MMA Diff. of $1,149. This amount is in excess of the $500 target

This article was written by

Dividends4Life profile picture
My entire career has been spent in industry within the finance and accounting realm. My career started in 1985 and has included exposure to implementing SFASs

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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