Insights

• Coca-Cola maintains strong profitability metrics, with gross, net, and EBITDA margins significantly exceeding industry averages, but recent trends indicate a decline in these margins.
• The company's high debt-to-equity ratio and increasing long-term debt levels raise concerns about its financial leverage and solvency.
• While Coca-Cola demonstrates efficient asset utilization, its tight liquidity position, as indicated by low current and quick ratios, could pose challenges in meeting short-term obligations.
• Fluctuations in net operating cash flow and free cash flow, coupled with volatile working capital management, highlight potential inconsistencies in earnings quality.
• The ongoing tax dispute with the IRS and increasing operating expenses present significant risk factors that could impact Coca-Cola's financial performance and strategic flexibility.

Analysis

• Revenue - Revenue has shown a slightly increasing trend over the past several years, but recent quarterly data indicates a decrease. - The company's revenue growth has been modest, and recent decreases indicate potential challenges. - Sales/revenue, total capital expenditure, and net operating cash flow are greater than the industry average.
  • Profitability
    • The gross profit margin, net profit margin, and EBITDA margin are all greater than the industry average.
    • Increasing operating expenses have put pressure on the company's margins and profitability.
    • Overall profitability has decreased, reflecting the impact of higher expenses and lower margins.
  • Liquidity
    • The current ratio and quick ratio are less than the industry average, suggesting a tight liquidity position.
    • The company may have difficulty meeting its short-term obligations if sales slow down.
  • Solvency
    • The total debt to total equity ratio and debt/EBITDA are greater than the industry average, indicating a high level of financial leverage.
    • The company's capital structure is heavily reliant on debt, which could increase its financial risk.
  • Operational Efficiency
    • The high gross profit margin and EBITDA margin suggest that the company is efficiently utilizing its assets to generate revenue.
    • The company needs to focus on controlling operating expenses and improving its efficiency to boost profitability.
  • Cash Flow Analysis - Net operating cash flow and free cash flow have fluctuated, reflecting the company's overall profitability and capital spending. - The company's ability to generate free cash flow is critical for debt repayment, dividend growth, and investment in organic growth opportunities.
  • Risk Factors
    • The high debt-to-equity ratio and increasing long-term debt are potential red flags.
    • The company's ongoing tax dispute with the IRS could impact its financial flexibility and capital allocation decisions.
  • Future Outlook
    • Future income statement performance will depend on the company's ability to grow revenue and control expenses.
    • The company's balance sheet is likely to remain relatively stable in the near term, with continued investments in property, plant, and equipment.
    • The company's debt levels are likely to remain high, which could limit its financial flexibility.

Benchmarks (as of 2025-03-12)

• Performance Comparison:

  • The Coca-Cola Co. (KO) has generally outperformed the Consumer Staples Select Sector SPDR Fund (XLP) across various time periods. Year-to-date, KO has significantly outperformed XLP with a return of 13.1% compared to 1.7% for XLP. Over the past one, two, and three years, KO has also shown superior performance, with returns of 17.93%, 24.31%, and 29.77% respectively, compared to XLP's 7.6%, 17.69%, and 20.16%.
  • KO has consistently outperformed XLP, indicating a strong relative performance.

• Risk and Return Analysis:

  • KO has provided higher annualized returns compared to XLP over the past one, two, and three years. The one-year annualized return for KO is 17.93% versus 7.6% for XLP.
  • KO has generally exhibited higher annualized volatility compared to XLP. For example, in Q1 2025, KO's volatility was 24.59% compared to XLP's 15.93%.
  • The maximum drawdown for KO was -17.27% on 10/05/2023, while for XLP it was -16.3% on 10/07/2022. This suggests that KO has a slightly higher risk profile in terms of potential peak-to-trough declines.

• Risk-Adjusted Performance:

  • KO has generally offered a better risk-adjusted return as indicated by its higher Sharpe Ratio compared to XLP.
  • The beta value of KO has consistently been below 1, indicating that it is less sensitive to market movements compared to XLP. In Q1 2025, the beta for KO was -0.02, while the beta for XLP was 0.18.

• Overall Assessment:

  • The Coca-Cola Co. (KO) has demonstrated superior performance compared to the Consumer Staples Select Sector SPDR Fund (XLP) across various metrics, including historical performance, annualized returns, and risk-adjusted returns. While KO has exhibited slightly higher volatility and drawdown, its higher Sharpe Ratio suggests that it offers a better risk-adjusted return. The beta values indicate that KO is less sensitive to market movements compared to XLP.
  • The trend of KO outperforming XLP suggests that KO may be a more attractive investment option within the consumer staples sector. However, investors should consider their risk tolerance and investment objectives before making any decisions.

Peers Price History(as of 2025-03-12)

• Performance Comparison:

  • The Coca-Cola Co. (KO) has shown mixed performance compared to Monster Beverage Corp. (MNST) and PepsiCo, Inc. (PEP). Over the past year, KO has significantly outperformed both MNST and PEP, with a return of 17.93% compared to -10.6% and -7.38%, respectively. However, over a 3-year period, KO's performance (29.77%) lagged behind MNST (48.57%) but surpassed PEP (3.84%). Year-to-date, KO has also outperformed, with a return of 13.1% compared to MNST's 4.0% and PEP's -0.49%.

• Risk and Return Analysis:

  • The annualized returns show that KO has provided higher returns than PEP over 1, 2, and 3-year periods. However, MNST's 3-year annualized return of 14.11% is higher than KO's 9.08%.
  • In terms of annualized volatility, MNST consistently exhibits higher volatility compared to KO and PEP. For example, as of March 12, 2025, MNST's volatility was 28.24%, while KO's was 22.27% and PEP's was 25.84%. This indicates that MNST's returns come with higher risk.
  • The maximum drawdown for KO was -17.27% on 10/05/2023, which is less severe than MNST's -26.04% on 08/08/2024 and PEP's -23.3% on 01/10/2025. This suggests that KO has a more conservative risk profile compared to its peers.

• Risk-Adjusted Performance:

  • The Sharpe Ratio analysis indicates that KO generally offers a better risk-adjusted return compared to MNST and PEP. As of March 12, 2025, KO's Sharpe Ratio was 1.25, while MNST's was -0.27 and PEP's was -0.3. This suggests that KO provides better returns for the level of risk taken.
  • The Beta value of KO has generally remained below 1, indicating lower sensitivity to market movements compared to MNST and PEP. As of March 12, 2025, KO's beta was -0.02, MNST's was 0.12, and PEP's was -0.07, further supporting the notion that KO is less volatile than its peers.

• Overall Assessment:

  • The Coca-Cola Co. (KO) presents a more stable and less volatile investment option compared to Monster Beverage Corp. (MNST) and PepsiCo, Inc. (PEP). While MNST has shown potential for higher returns, it comes with significantly higher volatility and drawdowns. PEP, while also relatively stable, has generally underperformed KO in terms of returns and risk-adjusted performance.
  • Recent trends indicate that KO has been outperforming its peers in the short term, with a strong year-to-date performance and a higher Sharpe Ratio. The lower beta and smaller drawdowns suggest that KO is a more conservative investment choice, suitable for investors seeking stability and consistent returns.

Peers Fundamentals(as of 2024-12-31)

1. Market Position and Size:

   • The Coca-Cola Co. (KO) holds a dominant market position with a market capitalization of $300,811.94 million, significantly larger than Monster Beverage Corp. (MNST) at $52,939.85 million and PepsiCo, Inc. (PEP) at $203,215.155 million.
   • KO's revenue for the most recent quarter is $46,766 million, which is less than PEP's $91,853 million but substantially greater than MNST's $7,492.71 million. Its EBITDA is $11,015 million, again less than PEP's $18,049 million but much higher than MNST's $2,010.73 million. KO's net income stands at $10,631 million, exceeding both MNST's $1,509.05 million and PEP's $9,578 million.
   • This indicates that while KO may not generate as much revenue as PEP, it maintains a strong market presence and achieves higher net income, reflecting efficient operations.

2. Profitability and Efficiency:

   • KO exhibits strong profitability with a Gross Profit Margin of 61.16%, surpassing MNST (54.04%), PEP (54.84%), and the industry average (42.61%). Its EBITDA Margin is 23.55%, lower than MNST's 26.84% but higher than PEP's 19.65% and the industry average of 6.49%. The Net Profit Margin for KO is 22.73%, outperforming MNST (20.14%), PEP (10.43%), and the industry average (-0.76%).
   • These figures suggest that KO excels in cost management and brand power, leading to superior profitability compared to its peers and industry standards.

3. Financial Health and Stability:

   • KO's Current Ratio is 1.03, which is less than MNST's 3.32 and the industry average of 2.07, but greater than PEP's 0.82. Its Quick Ratio is 0.84, lower than MNST's 2.65 and the industry average of 1.57, but higher than PEP's 0.65. The Total Debt to Total Equity Ratio is 182.83, higher than MNST's 7.29 and the industry average of 50.69, but lower than PEP's 264.68. KO's Debt / EBITDA is 4.04, exceeding MNST (0.19), PEP (2.45), and the industry average (1.73).
   • These metrics indicate that KO's liquidity position is weaker compared to MNST and the industry average, while its debt levels are relatively high. This could pose challenges in meeting short-term obligations and may limit financial flexibility.

4. Valuation and Market Perception:

   • KO's Price To Earnings ratio is 28.42, which is less than MNST's 36.52 and the industry average of 34.47, but greater than PEP's 21.32. The Price to Book Ratio is 12.1, exceeding MNST (8.89), PEP (11.27), and the industry average (11.83). KO's Price To Sales Ratio is 6.46, lower than MNST's 7.36 but higher than PEP's 2.22 and the industry average of 3.53.
   • These valuation metrics suggest that KO is reasonably valued compared to its earnings and book value. However, its higher price-to-sales ratio indicates that investors are paying a premium for each dollar of sales.

5. Cash Flow and Capital Management:

   • KO's Net Operating Cash Flow is $6,805 million, greater than MNST's $1,928.53 million but less than PEP's $12,507 million. Its Total Capital Expenditure is $2,064 million, exceeding MNST's $306.43 million but less than PEP's $5,318 million. KO's Free Cash Flow is $4,741 million, higher than MNST's $1,622.1 million but lower than PEP's $7,189 million.
   • KO generates substantial cash flow from operations, but its capital expenditures reduce its free cash flow. Compared to its market cap, KO's cash flow generation is solid but not exceptional.

6. Growth and Future Prospects:

   • KO shows consistently lower growth in most metrics compared to the peer group average, especially in recent years. Its year-to-year growth rates fluctuate significantly, and its 3-year and 5-year CAGR figures are generally lower than the peer group average, indicating slower long-term growth.
   • The declining growth trend in profitability and cash flow metrics raises concerns about its future prospects.

7. Potential for Investment:

   • From an investment perspective, KO presents a mixed picture. Its strong profitability and dominant market position make it an attractive investment, but its slower growth rates and higher debt levels raise some concerns.
   • Investors should carefully consider KO's valuation, growth potential, and financial stability compared to its peers and industry benchmarks before making an investment decision.

8. Key Risks and Considerations:

   • KO's liquidity position is weaker compared to MNST and the industry average, while its debt levels are relatively high. This could pose challenges in meeting short-term obligations and may limit financial flexibility.
   • KO's slower growth rates compared to peers could pose challenges to its long-term competitive advantage.

9. Overall Assessment:

   • KO's overall financial health is solid, characterized by strong profitability and a dominant market position. However, its liquidity and debt levels raise some concerns, and its recent growth rates have been lagging behind its peers.
   • While KO's established brand and global presence provide stability, it needs to address its liquidity concerns and improve its growth trajectory to maintain its competitive edge.