Coca-Cola (KO – Get Rating) is the largest nonalcoholic beverage entity in the world, owning and marketing some of the leading carbonated beverage brands, such as Coke, Fanta, and Sprite, as well as non sparkling brands, such as Minute Maid, Georgia Coffee, and Glaceau.
The company’s aggressive cost cutting has helped its bottom line. KO should benefit from exiting Zombie brands to divert resources toward brands with better growth potential. It is also increasing investments to expand digital presence due to changing consumer preferences amid pandemic. KO should see future growth as it moves into healthier beverages.
KO is financially sound to meet short term obligations as its cash and short-term cash investments at the end of the second were up 12.2%. In the same quarter, the company also extended the duration of its outstanding debt by issuing $11.5 billion of long-term maturities, which helps the long term debt profile.
The firm has had stable earnings growth, averaging 26.3% growth over the past three years. Earnings are expected to grow 14.4% next year. KO is fairly valued with a P/E of 23.6, which is less than the industry average and the S&P 500.
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