Valued at a market cap of $270.7 billion, The Coca-Cola Company (KO) is a beverage company that manufactures, markets, and sells various nonalcoholic beverages, spanning from sodas to energy drinks. The Atlanta, Georgia-based company is making investments in healthier alternatives like coffee, sparkling water, and sports drinks through its Coca-Cola Energy, Coca-Cola Plus Coffee, Powerade Ultra, and Powerade Power Water brands.
This beverage giant's shares have lagged behind the broader market over the past 52 weeks. KO has gained 6.9% over this time frame, while the broader S&P 500 Index ($SPX) has soared 23.3%. Moreover, over the past six months, the stock is down 5.4%, compared to SPX’s 11.7% rise.
Zooming in further, Coca-Cola has also lagged behind the Consumer Staples Select Sector SPDR Fund’s (XLP) 8.5% gain over the past 52 weeks and 2.2% return on a six-month basis.
On Jan. 28, shares of KO plunged 2.4% as the company had to recall some of its soft drinks in Europe after higher-than-normal levels of a chemical called chlorate were detected in bottles and cans at a production plant in Belgium. Batches of other companies like Fanta, Sprite, Minute Maid, and Fuze Tea were also recalled.
Moreover, rising internal costs and softer consumer spending are affecting Coca-Cola’s performance. Additional challenges, including a lawsuit filed by Los Angeles County, accusing the company of contributing to plastic pollution and engaging in deceptive business practices, have further contributed to its underperformance over the past year.
On Oct. 23, shares of KO plunged 2.1% after its Q3 earnings release despite delivering better-than-expected Q3 adjusted earnings of $0.77 per share and revenues of nearly $11.9 billion. The bottom line grew 5% from the year-ago quarter, while revenues declined 1% year-over-year. Due to a slowdown in China, Mexico, and Turkey, global unit volume declined by 1%, which overshadowed an improved price/mix in the quarter. Nonetheless, the management expressed confidence in the long-term strategy, emphasizing investments in brand growth and operational efficiency.
For the current fiscal year, ending in December, analysts expect Coca-Cola’s EPS to grow nearly 6% year over year to $2.85. The company’s earnings surprise history is promising. It surpassed the Wall Street estimates in each of the last four quarters.
Among the 22 analysts covering the stock, the consensus rating is a “Strong Buy,” which is based on 18 “Strong Buy,” one “Moderate Buy,” and three “Hold” ratings.
This configuration is significantly more bullish than three months ago, with 15 analysts suggesting a “Strong Buy.”
On Jan. 30, Jefferies analysts upgraded Coca-Cola’s rating to “Buy” and raised its price target to $75, noting the company’s robust fundamentals and anticipated cash flow increase. This price target indicates a 17.1% potential upside from the current levels.
The mean price target of $72.73 represents a 13.5% upside from KO’s current price levels, while the Street-high price target of $85 suggests an upside potential of 32.7%.
