Coca-Cola Is Well Positioned To Achieve Higher End Of Sales Growth Outlook, BMO Says

Coca-Cola Co KO has delivered four consecutive quarters of over 5% top line growth and seems poised to meet the higher end of its longer-term outlook of 4-6%, according to BMO Capital Markets.

The Analyst

BMO’s Amit Sharma maintained a Market Perform rating on Coca-Cola while raising the price target to $52.

The Thesis

Coca-Cola has delivered another quarter of strong organic growth, which bears testament to the tactical, strategic and cultural changes under CEO James Quincey having “materially altered” its top-line trajectory, Sharma said in the note.

He cited four reasons for his optimism regarding the company being able to achieve the higher end of its long-term sales growth outlook.

First, Coca-Cola has achieved a solid price/mix with revenue management and price/pack initiatives.

The second reason was mentioned as the company’s stronger innovation pipeline, like Coke Energy, but also “increased momentum in brand Coca-Cola.”

The analyst added that Coca-Cola is rolling out vending machines at an accelerated pace, which would lead to increased distribution. The fourth reason he cited was the company’s share gain opportunities in both developed and developing markets.

“That said, the key question is how much of this attractive outlook is already reflected in KO's share price, given that it's already trading at… the highest multiple in at least the past 15 years,” Sharma wrote.

Price Action

Shares of Coca-Cola were down 0.83% to $53.88 at time of publication Wednesday.

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