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Finanzas: Coca-Cola: Ahead Of Earnings

Finanzas: Coca-Cola: Ahead Of Earnings
Abril 17, 2017

Autor/Fuente: Seeking Alpha 👤Periodista: María Luisa Ayala 🕔17.Abr 2017

 

Summary

  • New CEO set to take over.
  • Ambitious to work on growth opportunities.
  • Continued strong dividend yield.

 

The Coca-Cola Company (NYSE:KO) is expected to release its first-quarter 2017 results on April 25. The first-quarter results and conference call should give an indication as to how well its refranchising of bottling operations is going. Earlier this year, the company announced lowered full-year 2017 profit expectations largely due to the refranchising.

Change of Leadership

On May 1, KO will officially change leadership when current President and Chief Operating Officer James Quincey takes over as Chief Executive Officer. Quincey will take over for Muhtar Kent as KO is battling a number of headwinds including consumers turning to less sugary beverage options.

Having been with KO since 1996 and serving in various positions around the world, James Quincey brings a wealth of experience with him to his new post. He has previously stated that he will push KO into new categories and continue to innovate. Warren Buffett praised the appointment of Quincey as CEO, saying he believes the company has made a smart investment in its future with his selection.

Ambitious for Growth

Quincey is eager to steer the company towards major growth. He has acknowledged that the future is about lower-calorie and zero-calorie beverages. As the world continues to become more health conscious, it will be important for KO to keep up with the growing trends and invest into growing segments in the market. Recently, Mr. Quincey said he plans to focus on growing no-calorie sparkling beverages along with driving Coca-Cola Zero Sugar to build on momentum that is already there.

Among the more healthy pushes KO is making are several brands it seeks to continue to grow in order to offset the decreasing sales of its staple sugary beverage segment.

Some of the more healthy-centered brands include:

Fairlife milk (grew by double digits in 2016)
Smartwater, a premium water
Vitaminwater, an enhanced flavored water
Acquisition of AdeS, Latin America’s largest soy-based beverage company
Launch of Georgia, coffee category beverage in Japan
Coca-Cola Zero Sugar; recently expanded to France, Belgium, the Netherlands and Ireland
Investment in Nigeria’s leading dairy and juice company, Chi

Like with any company, if you are not growing, you are dying. Based on recent investments and new CEO James Quincey, KO is primed to grow in new segments.

Solid Dividend Return to Shareholders

KO currently has a strong dividend yield of approximately 3.5%. During the first quarter, the company increased its quarterly dividend 5% from $0.35 to $0.37 per share. The increase in dividend reflects KO’s confidence in long-term cash flow. KO has always made it a point to reward shareholders through a solid dividend return and buybacks. However, the continuous raise in dividends doesn’t come without skepticism. Some believe KO is in trouble and may not be able to sustain its solid dividend due to lower free cash flow over the recent years.

This may be true – if KO doesn’t increase its free cash flow, it obviously won’t be in a position to continue to raise its dividend – but that could be said for any company to a degree. With the investments KO is making in new beverage segments, it obviously is working to increase its future cash flow. With a renewed focus on lower sugar and healthy beverages, KO should have healthy free cash flow for years to come.

Summary

With a new CEO coming into position to lead the company, KO is more focused on growth in new beverage segments now than in recent memory. During the first-quarter 2017 earnings and conference call, pay close attention to the different innovative ways KO seeks to continue its growth in our more health-focused world. KO’s investments and an increased focus on exciting growth should lead to a strong dividend for the foreseeable future. Watch the upcoming earnings announcement on April 25th closely; it could be a good time to pick up shares of a company which puts an emphasis on rewarding shareholders.

Disclosure: I am/we are long KO.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

 

Fuente: Seeking Alpha

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