Market Overview

Is Coca-Cola A Growth Company?

Is Coca-Cola A Growth Company?

Beverage giant The Coca-Cola Co (NYSE: KO) deserves to trade at a premium valuation after a first hand visit to the Atlanta headquarters reinforces the company is seeing good momentum into next year, according to Bank of America Merrill Lynch.

BofA Sees A Growth Company

Coca-Cola's management team said in a meeting with Bank of America that it's in a better position today and backed by a more balanced revenue model, analyst Bryan Spillane said in a research report.

For example, the company can leverage its Costa coffee acquisition in different ways depending on the market while simultaneously leveraging its fountain and food service relationships, the analyst said.

BofA reiterated a Buy rating on Coca-Cola and lifted the price target from $52 to $55.

The price target on Coca-Cola stock is based on 25.6 times (up from 24.2 times) fiscal 2019 estimated EPS of $2.15, which is an approximate 40-50-percent premium to the 2019 estimated weighted average P/E across food, beverage and tobacco companies.

'Not The Coca-Cola You And I Grew Up With'

Coca-Cola is a much different company today than it was decades ago, CNBC's Sara Eisen said this week after interviewing James Quincey. Under Quincey's leadership, the 132-year-old beverage company is no longer the "Coca-Cola you and I grew up with," she said.

Coca-Cola now sells beverages under new brands like Bodyarmor and completely new categories like juice and milk, Eisen said. Walking up and down the grocery aisle shows soda is a "pretty small part" of its portfolio, she said.

Quincey has overseen six deals in 2018, and the executive said in the CNBC interview they will help the company show a growth level investors want to see. After completing multiple deals, the executive said his priority is now absorbing the acquired companies, including the $5.1-billion acquisition of British chain Costa Coffee.

Price Action

Coca-Cola shares traded around $49.42 at the time of publication Friday.

Related Links:

As Coke Shakes Up Energy Drink Category, Monster Earns A Downgrade

Barclays Finds Coca-Cola's Stock Refreshing As Consumer Staples Industry Suffers

Latest Ratings for KO

Jul 2020Morgan StanleyUpgradesEqual-WeightOverweight
Jun 2020Morgan StanleyMaintainsEqual-Weight
Apr 2020CitigroupMaintainsNeutral

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