Key takeaways
View moreThe current valuation appears excessive given the combination of high EV/EBITDA and EV/Sales multiples relative to industry averages, coupled with recent negative operating cash flow and high financial leverage. While the company's strong brand portfolio and market position justify a premium valuation, the magnitude of the premium appears too large given the moderate growth outlook and significant risks, including the ongoing IRS dispute and currency headwinds.
- Coca-Cola's profitability remains strong, with gross and net profit margins significantly above industry averages, but revenue has shown slight declines in recent quarters.
- The company's high debt-to-equity ratio (187.43) poses a significant financial risk, exceeding the industry average of 60.06.
- Recent net operating cash flow was significantly negative (-$5.20 billion), raising concerns about short-term liquidity management.
- Management reaffirmed its organic revenue growth guidance of 5% to 6% for 2025, but analysts are focused on the sustainability of unit case volume growth given geopolitical risks.
- The ongoing tax dispute with the IRS represents a significant legal and financial risk that could impact future profitability.
- KO has generally outperformed the Consumer Staples Select Sector SPDR Fund (XLP) in terms of historical performance and annualized returns, but has underperformed Monster Beverage Corp. (MNST) over the past year.
- The company's all-weather strategy and focus on innovation, particularly with brands like Fairlife, are key to addressing changing consumer preferences and driving future growth.
- Regulatory changes, such as taxes on sugary beverages, and increasing competition from smaller brands pose ongoing threats to Coca-Cola's market position.
- The Enterprise Value to EBITDA ratio (26.10 to 31.29) and Enterprise Value to Sales ratio (6.44 to 7.33) are above the industry averages, suggesting a premium valuation.
- The company's ability to manage debt levels, improve cash flow generation, and adapt to changing market conditions will be crucial for maintaining its competitive position and driving future growth.
Evaluation summary
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Company Overview:
- The Coca-Cola Co. (KO) is a global beverage company that manufactures, markets, and sells non-alcoholic beverages, including its flagship Coca-Cola brand. Key products include sparkling soft drinks, water, sports drinks, juice, dairy, and plant-based beverages. The company operates through six segments: Europe, Middle East and Africa; Latin America; North America; Asia Pacific; Global Ventures; and Bottling Investments.
- The company's peers used for comparative analysis are Monster Beverage Corp. (MNST) and PepsiCo, Inc. (PEP). The benchmark used is the Consumer Staples Select Sector SPDR Fund (XLP).
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Financial Performance:
- Recent quarterly data shows a slight decrease in revenue, from $12.31 billion in 2024-06-30 to $11.13 billion in 2025-03-31. Net income has also fluctuated, from $2.41 billion to $3.33 billion over the same period.
- Gross profit margin remains strong, ranging from 59.54% to 62.59%, significantly higher than the industry average of 42.78%. Net profit margin is also high, ranging from 19.40% to 29.92%, compared to the industry average of -1.81%.
- Return on Average Assets (ROA) ranges from 10.21% to 10.72%, Return on Average Total Equity (ROE) ranges from 39.40% to 41.86%, and Return on Average Invested Capital ranges from 16.01% to 16.96%. These are all significantly above the industry averages of -10.03%, -0.24%, and -1.00% respectively.
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Operational Efficiency:
- Total assets have fluctuated, ranging from $100.55 billion to $106.27 billion. Total liabilities range from $73.79 billion to $78.11 billion.
- Working capital has varied, from $748 million to $2.37 billion, indicating some variability in short-term liquidity management.
- Net operating cash flow has been volatile, with a significant negative value of -$5.20 billion in the most recent quarter (2025-03-31), compared to $3.59 billion in 2024-06-30.
- Free cash flow has also been negative in the most recent quarter, at -$5.51 billion. Free cash flow margin was -0.50% in 2025-03-31.
- Total capital expenditure was $309 million in 2025-03-31. Depreciation, depletion & amortization was $267 million.
- Cash dividends paid were $89 million in 2025-03-31 and $4.09 billion in 2024-12-31.
- The current ratio ranges from 1.03 to 1.10, below the industry average of 2.10. The quick ratio ranges from 0.84 to 0.92, also below the industry average of 1.59.
- The total debt to total equity ratio is high, ranging from 169.49 to 187.43, significantly above the industry average of 60.06. The debt / EBITDA ratio ranges from 3.80 to 4.26, above the industry average of 1.94.
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Growth Opportunities:
- The company is focused on strategic initiatives, such as new product launches, market expansion, and pricing strategies, as highlighted in the fundamentals analysis.
- The earnings call emphasized the importance of innovation, with a focus on multi-year initiatives and fewer, bolder launches. Fairlife continues to be a significant growth driver, with upcoming capacity expansion.
- Management is focused on tailoring execution to win locally in key geographies, categories, and channels.
- The company's all-weather strategy enables them to expand their toolkit and respond to opportunities and challenges ahead.
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Recent Developments and Market Sentiment:
- The earnings report for 2025Q1 highlighted a strong start to the year with 2% volume growth and 6% organic revenue growth. Management reaffirmed its organic revenue growth guidance of 5% to 6% for 2025.
- Analysts focused on the sustainability of unit case volume growth given tougher comparisons and geopolitical risks. Concerns were raised about softer performance in Mexico and actions planned to restart volume growth.
- The company is monitoring the dynamic tariff landscape and believes it has numerous levers to manage the impact.
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Risks and Threats:
- The company faces risks related to foreign currency exchange rate fluctuations and economic/political instability in certain international markets, as highlighted in the SEC filings.
- Increasing competition from smaller, more agile brands and private label offerings poses a threat.
- Regulatory changes, such as taxes or restrictions on sugary beverages, could impact demand.
- The ongoing tax dispute with the IRS represents a significant legal and financial risk.
- The high debt-to-equity ratio increases financial risk and vulnerability to economic downturns.
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Valuation Analysis:
- The Enterprise Value to EBITDA ratio ranges from 26.10 to 31.29, above the industry average of 21.52. The Enterprise Value to Sales ratio ranges from 6.44 to 7.33, significantly above the industry average of 3.73.
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Price Performance:
- The stock price has fluctuated between approximately $68 and $72 from May 2025 to July 2025.
- The Coca-Cola Co. (KO) has generally outperformed the Consumer Staples Select Sector SPDR Fund (XLP) across most time periods. As of the latest data, KO's year-to-date return is 15.38%, significantly higher than XLP's 4.04%. Over a 1-year period, KO returned 14.39% compared to XLP's 8.61%.
- Compared to peers, KO has underperformed Monster Beverage Corp. (MNST) but significantly outperformed PepsiCo, Inc. (PEP) over the past year.
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Future Outlook:
- Management reaffirmed its organic revenue growth guidance of 5% to 6% for 2025 and now expects comparable currency neutral earnings per share growth of 7% to 9%.
- The company anticipates a 2 to 3 point currency headwind to comparable net revenues and a 5 to 6 point currency headwind to comparable earnings per share.
- Future financial performance will likely be influenced by strategic initiatives, such as new product launches, market expansion, and pricing strategies.
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Summary:
- The Coca-Cola Co. exhibits strong profitability and brand recognition but faces challenges related to revenue growth, high financial leverage, and external risks.
- Strengths: High gross and net profit margins, strong brand portfolio, and effective cost management.
- Weaknesses: Declining revenue in recent quarters, high debt-to-equity ratio, and volatile cash flow.
- Opportunities: Market expansion, innovation in healthier beverage options, and strategic acquisitions.
- Threats: Increasing competition, regulatory changes, foreign currency fluctuations, and the ongoing tax dispute with the IRS.
- The company's financial health is stable, but the high debt levels and recent negative cash flow trends require monitoring.
- Critical factors for future performance include managing debt levels, improving cash flow generation, and adapting to changing consumer preferences.
- Areas requiring further monitoring include revenue growth, margin trends, expense control, and the outcome of the IRS tax case.
- Overall, Coca-Cola presents a mixed investment profile. Its strong brand and profitability are attractive, but the high debt and external risks warrant caution. The company's ability to innovate and adapt to changing market conditions will be crucial for future success.
Price history
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Fundamentals
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Insights
- Coca-Cola exhibits strong profitability, driven by effective cost management and pricing strategies, but faces challenges in maintaining revenue growth and generating consistent cash flow.
- The company's high financial leverage, as indicated by the high debt-to-equity ratio, increases financial risk and vulnerability to economic downturns.
- Improving cash flow generation and managing debt levels will be crucial for long-term financial stability and sustainable growth.
- Strategic initiatives, such as new product launches, market expansion, and refranchising bottling operations, will play a key role in shaping the company's future financial performance.
- Monitoring key metrics, such as revenue growth, margin trends, expense control, and cash flow generation, will be essential to assess the company's financial health and competitive position.
Analysis
- Revenue
- Revenue growth has been moderate, but recent quarterly data indicates a slight decrease, suggesting potential challenges in maintaining growth momentum.
- The company's all-weather strategy and management's focus on refranchising bottling operations may impact revenue trends.
- Monitoring revenue growth and adapting to changing consumer preferences will be crucial for maintaining a competitive position.
- Profitability
- Profitability remains strong, driven by effective cost management and pricing strategies, as reflected in the high net profit margin.
- The company's ability to maintain profitability despite recent revenue declines suggests a resilient business model.
- The high return on equity and return on assets indicate efficient use of resources to generate profits.
- Liquidity
- The current ratio of 1.1 indicates adequate liquidity to cover short-term liabilities, but is below the industry average.
- The quick ratio of 0.89 suggests a slightly conservative liquidity position.
- Maintaining adequate liquidity will be essential to meet short-term obligations and fund future growth.
- Solvency
- The high total debt to total equity ratio of 187.43 indicates high financial leverage and risk, and is significantly above the industry average.
- The debt / EBITDA ratio of 3.91 suggests a moderate level of debt relative to earnings.
- Managing debt levels and improving solvency will be crucial for long-term financial stability.
- Operational Efficiency
- Effective cost management and pricing strategies have contributed to stable margins and strong profitability.
- The company's ability to control operating expenses in relation to revenue growth demonstrates operational efficiency.
- Continued focus on operational efficiencies will be essential to maintain profitability and competitiveness.
- Cash Flow Analysis - Net operating cash flow has been volatile, with a significant negative value in the most recent quarter due to changes in working capital. - Free cash flow has also been negative, indicating that the company is not generating enough cash from its operations to cover its capital expenditures. - Improving cash flow generation will be crucial to fund future growth and manage debt obligations.
- Risk Factors
- High financial leverage, as indicated by the high debt-to-equity ratio, increases financial risk and vulnerability to economic downturns.
- Volatility in cash flow from operations and free cash flow raises concerns about the company's ability to meet its financial obligations.
- Exposure to foreign currency exchange rate fluctuations, as mentioned in the SEC filings, can impact revenue and profitability.
- Future Outlook
- Future financial performance will likely be influenced by strategic initiatives, such as new product launches, market expansion, and pricing strategies.
- Monitoring key metrics, such as revenue growth, margin trends, expense control, and cash flow generation, will be crucial to assess the company's financial health.
- Adapting to changing consumer preferences and market conditions will be essential to maintain a competitive position and drive future growth.
- Profitability
Financial statements
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Public filings
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- Coca-Cola faces a range of competitive, regulatory, and operational challenges in the global beverage industry, including the shift towards healthier products, private label competition, and commodity price volatility.
- The ongoing tax dispute with the IRS represents a significant legal and financial risk, with the potential for substantial additional tax liabilities if the company does not prevail on appeal.
- Despite these headwinds, Coca-Cola maintains a strong market position, diversified portfolio of brands, and healthy financial position that allows it to invest in growth initiatives and return capital to shareholders.
- Management's focus on refranchising bottling operations, acquiring emerging brands, and optimizing its cost structure suggests the company is adapting its business model to navigate industry changes.
- Key risks to monitor include the outcome of the IRS tax case, the company's ability to innovate and stay relevant with evolving consumer preferences, and the impact of macroeconomic and regulatory factors on its global operations.
Core Business and Operations:
- The Coca-Cola Company is a global beverage company that manufactures, markets, and sells a wide range of nonalcoholic beverage brands, including its flagship Coca-Cola brand
- The company operates through six operating segments: Europe, Middle East and Africa; Latin America; North America; Asia Pacific; Global Ventures; and Bottling Investments
- Key products include sparkling soft drinks, water, sports drinks, juice, dairy, and plant-based beverages
- Major customers include retailers, wholesalers, and foodservice distributors
- The company competes with other large beverage companies, as well as smaller regional and local players, in the highly competitive global beverage industry
Industry and Market Trends:
- The global beverage industry is facing trends towards healthier, more sustainable products, as well as increased competition from emerging brands and private label offerings
- Regulatory changes, such as taxes on sugary beverages and restrictions on marketing/advertising, pose challenges for traditional carbonated soft drink companies
- The COVID-19 pandemic has disrupted consumer purchasing patterns and distribution channels, though the industry is recovering
- Commodity price fluctuations, particularly for key inputs like sweeteners and packaging materials, can impact profitability
Recent Events:
- The company has been actively refranchising its bottling operations in certain international markets to focus on its core concentrate business
- In 2021, the company acquired the remaining 85% ownership stake in BodyArmor, a sports performance and hydration beverage brand
- The company is facing an ongoing tax dispute with the U.S. Internal Revenue Service related to transfer pricing adjustments for the 2007-2009 tax years
Risk Factors:
- Exposure to foreign currency exchange rate fluctuations and economic/political instability in certain international markets
- Increasing competition from smaller, more agile brands and private label offerings
- Regulatory changes, such as taxes or restrictions on sugary beverages, that could impact demand
- Commodity price volatility and supply chain disruptions affecting key inputs
- Potential unfavorable outcome of the ongoing IRS tax dispute, which could result in significant additional tax liabilities
Legal Matters:
- The company is engaged in an ongoing tax dispute with the IRS over transfer pricing adjustments for the 2007-2009 tax years, which could result in significant additional tax liabilities if the company does not prevail on appeal
Management's Discussion and Analysis:
- The company's revenue growth is driven by a combination of volume growth, pricing/mix changes, and acquisitions/divestitures
- Profitability is impacted by commodity costs, marketing/advertising expenses, and foreign exchange rate fluctuations
- The company has a strong liquidity position, with the ability to generate significant cash flow from operations and access debt markets
- Capital allocation priorities include investing in the business, growing dividends, strategic acquisitions, and share repurchases
Earnings calls
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Earnings Report 2025Q1 (2025-04-29)
Key takeaways
- Agility is Key: The company's emphasis on agility and adaptability is crucial for navigating the dynamic external environment and addressing challenges in specific markets.
- Local Relevance Matters: Reinforcing the localness of global brands and focusing on affordability are key strategies for mitigating geopolitical tensions and maintaining consumer engagement.
- Margin Expansion Potential: Despite strong margin performance, there is still potential for further margin expansion, particularly in North America, driven by a stronger core business and improved revenue growth management.
- Currency Headwinds Persist: Currency fluctuations continue to pose a significant challenge, impacting both revenue and earnings, and require careful monitoring and hedging strategies.
- Innovation is Strategic: The company is strategically investing in innovation, focusing on multi-year initiatives and fewer, bolder launches to drive greater impact and improve success rates.
- Fairlife Remains a Growth Driver: Fairlife continues to be a significant growth driver, and the upcoming capacity expansion will enable further growth and innovation in the brand.
- All-Weather Strategy Provides Resilience: The company's all-weather strategy provides a resilient framework for navigating various market conditions and delivering long-term value.
Focus of management’s prepared remarks
- First Quarter Performance: The company delivered 2% volume growth and 6% organic revenue growth, achieving the high end of their long-term growth algorithm. Gross and operating margins also expanded.
- Human Centricity: Management emphasized the importance of their employees and system associates in achieving these results, highlighting their adaptability and value creation.
- Consumer and Customer Focus: The company remains committed to being consumer and customer-centric, tailoring execution to win locally in key geographies, categories, and channels.
- Global Category Growth: Volume grew across all global beverage categories, with value share gains in overall, at-home, and away-from-home channels.
- Regional Performance: Detailed performance reviews were provided for North America, Latin America, EMEA, and Asia-Pacific, highlighting both successes and challenges in each region.
- Portfolio of Love Brands: The company's total beverage portfolio offers consumers choice, with 30 global and local billion-dollar brands addressing a broad range of consumer needs.
- Marketing and Innovation Agenda: The ongoing transformation continues to fuel top-line growth, with initiatives like Studio X and the return of the Share a Coke campaign.
- Ecosystem Optimization: The company strives to optimize its broader ecosystem, which includes suppliers and contributes significantly to local economies.
- Long-Term Growth Opportunities: The building blocks behind long-term growth opportunities remain unchanged, including operating in a resilient industry, high barriers to scale, and significant headroom to develop the industry and gain share.
- All-Weather Strategy: The company's all-weather strategy enables them to expand their toolkit and respond to opportunities and challenges ahead.
- Financial Guidance: The company reaffirmed its organic revenue growth guidance of 5% to 6% and now expects comparable currency neutral earnings per share growth of 7% to 9%.
- Global Trade Environment: The company is monitoring the dynamic tariff landscape and believes it has numerous levers to manage the impact.
Focus of the analyst Q&A
- Full Year Earnings Guidance:
- Reasons for maintaining full-year earnings guidance despite a strong first quarter and improved FX outlook.
- Concerns about discrete factors impacting full-year currency-neutral earnings.
- Unit Case Volume Growth:
- Sustainability of unit case volume growth given tougher comparisons and geopolitical risks.
- Mexico Performance:
- Factors contributing to softer performance in Mexico.
- Actions planned to restart volume growth in Mexico.
- Impact of consumer sentiment and elections.
- US Market Strategy:
- Actions being taken to address consumer softness and negative brand sentiment in the U.S.
- Local vs. Global Brands:
- Strategy for leveraging local brands in the current environment.
- Positioning of global brands to emphasize local relevance.
- Global Trade Dynamics:
- Impact of tariffs on the business and quantification of potential impact.
- Response to anti-American brand sentiment due to global trade disputes.
- Operating Margins:
- Sustainability of strong operating margins.
- Potential need to use margin strength to drive growth in developed markets.
- Fairlife Growth:
- Trajectory of Fairlife's growth and capacity expansion plans.
- Intellectual property protection for the brand.
- EMEA Performance:
- Performance of Western Europe and consumer dynamics in the region.
- Away-From-Home Channel:
- Trends in the away-from-home channel and outlook for the year.
- Impact on top line and margins if the channel slows.
- Currency Impact:
- Degree to which the company is contemplating the end of a strong dollar cycle.
- Potential changes in investment and capital return strategies.
- Innovation in Wellness and Functional Space:
- Thoughts on innovation in the wellness and functional space, including ingredients like ashwagandha and Lion's mane.
- Need for clinical studies to support health claims.
- Second Quarter Outlook:
- Expectations for the second quarter and potential shifts in outlook.
- Impact of short-term supply chain disruptions.
- Asia-Pacific Volumes:
- Drivers of volume growth in Asia-Pacific, particularly in China.
- Consumer environment in China and portfolio rationalization.
- North America Margin and Volume Balance:
- Striking the right balance between margin delivery and volume growth in North America.
- Marketing Productivity:
- Outcomes focused on to ensure marketing productivity is efficient and effective.
- Ukraine and Russia Business:
- Business size in Ukraine and Russia four to five years ago and today.
- Potential future outlook if there was peace.
- Trademark Coke Misconceptions:
- Progress on clearing up misconceptions about Trademark Coke.
- Hispanic Consumer:
- State of the Hispanic consumer and spending patterns.
Summary
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Financial Performance
Coca-Cola reported a strong first quarter, delivering 2% volume growth and organic revenue growth of 6%, at the high end of their long-term growth algorithm. Comparable gross and operating margins expanded. Comparable EPS increased 1% year-over-year to $0.73, despite a 5% currency headwind, dilution from bottler refranchising, elevated net interest expense, and an approximate 2 point increase in the effective tax rate. Free cash flow, excluding the fairlife contingent consideration payment, was approximately $560 million, an increase versus the prior year.
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Revenue Drivers
Revenue growth was driven by pricing actions across markets and volume growth across all global beverage categories. The company won value share across overall, at-home, and away-from-home channels. North America saw revenue and profit growth, but volume was impacted by weather, calendar shifts, and weakening consumer sentiment, particularly among Hispanic consumers. Latin America experienced flat volume but revenue and operating income growth. EMEA saw growth in volume, revenue, and operating income. Asia-Pacific delivered growth in volume, revenue, and operating income, driven by China and India.
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Profit Margins and Cost Management
Comparable gross margin increased approximately 30 basis points, and comparable operating margin increased approximately 130 basis points. These increases were driven by underlying expansion and a benefit from bottler refranchising, partially offset by currency headwinds. Pricing from intense inflationary markets contributed to approximately 1 point of price mix growth, down from approximately 5 points in full year 2024. The company is focused on productivity benefits, expected to be weighted towards the latter half of 2025.
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Guidance and Outlook
The company maintained its 2025 organic revenue growth guidance of 5% to 6% and now expects comparable currency neutral earnings per share growth of 7% to 9%. They anticipate a 2 to 3 point currency headwind to comparable net revenues and a 5 to 6 point currency headwind to comparable earnings per share. The underlying effective tax rate for 2025 is expected to be 20.8%. Overall, the company continues to expect 2025 comparable earnings per share growth of 2% to 3%.
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Strategic Initiatives
Coca-Cola is focused on its all-weather strategy, emphasizing agility, consumer centricity, and close partnerships. Key initiatives include leveraging Studio X for digital marketing, the return of the Share a Coke campaign, and multi-year innovations like Fuze Tea and Simply Pop. The company is also optimizing its broader ecosystem, focusing on local production and procurement.
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Management Commentary
Management expressed confidence in achieving their objectives, citing the resilience of their business model and the strength of their portfolio. They emphasized the importance of adapting to changing consumer dynamics and leveraging their global scale with local expertise. They acknowledged macroeconomic uncertainty and geopolitical tensions but believe they have the levers to manage the impact.
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Industry and Market Conditions
The company operates in a resilient industry with predictable growth and high barriers to scale. They noted that global trade tensions and broader macro uncertainty may persist and impact consumer sentiment. They are closely monitoring consumer behavior and adjusting their strategies accordingly, particularly in response to geopolitical tensions and economic conditions in key markets like North America, Mexico, and Europe.
Comparative analysis
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Benchmarks (as of 2025-06-27)
Consumer Staples Select Sector SPDR Fund (XLP)
- Performance Comparison:
- The Coca-Cola Co. (KO) has generally outperformed the Consumer Staples Select Sector SPDR Fund (XLP) across most time periods. As of the latest data, KO's year-to-date return is 15.38%, significantly higher than XLP's 4.04%. Over a 1-year period, KO returned 14.39% compared to XLP's 8.61%. However, for the 3-month period, KO underperformed XLP with returns of -1.1% and -0.69% respectively.
- Risk and Return Analysis:
- The annualized returns show that KO has outperformed XLP over 1-year (14.39% vs 8.61%), 2-year (11.57% vs 7.54%), and 3-year (7.05% vs 6.54%) periods. This indicates that KO has provided higher returns than XLP.
- In terms of annualized volatility, both KO and XLP have experienced fluctuations. As of Q2 2025, KO's volatility ranged from 15.21% to 25.31%, while XLP's ranged from 11.51% to 24.71%. This suggests that KO has been slightly more volatile than XLP.
- The maximum drawdown for KO was -17.27% on 2023-10-05, while the maximum drawdown for XLP was -16.3% on 2022-10-07. This indicates that KO experienced a slightly larger peak-to-trough decline than XLP during the analyzed period, suggesting a slightly higher risk profile.
- Risk-Adjusted Performance:
- The Sharpe ratios for KO were generally higher than those for XLP, indicating that KO offered better risk-adjusted returns compared to XLP over the analyzed period. As of Q2 2025, KO's Sharpe ratio ranged from 0.73 to 1.2, while XLP's Sharpe ratio ranged from 0.48 to 1.1.
- The beta values for both KO and XLP were consistently below 1 throughout the analyzed period, indicating that both investments were less volatile than the market. As of Q2 2025, KO's beta ranged from 0.06 to 0.09, while XLP's beta ranged from 0.25 to 0.27. This suggests that KO is less sensitive to market movements than XLP.
- Overall Assessment:
- The Coca-Cola Co. (KO) has generally outperformed the Consumer Staples Select Sector SPDR Fund (XLP) in terms of historical performance and annualized returns. While KO has exhibited slightly higher volatility and a larger maximum drawdown, its higher Sharpe ratios suggest that it has offered better risk-adjusted returns. The beta values indicate that both KO and XLP are less volatile than the market, with KO being less sensitive to market movements than XLP.
- Recent trends show that both KO and XLP experienced decreasing drawdowns and Sharpe ratios in Q2 2025. The beta values for both KO and XLP were stable, with KO's beta ranging from 0.06 to 0.09 and XLP's beta ranging from 0.25 to 0.27.
Peers Price History(as of 2025-06-27)
- Performance Comparison:
- The Coca-Cola Co. (KO) has shown mixed performance compared to its peers. Over the past year, KO has underperformed Monster Beverage Corp. (MNST) but significantly outperformed PepsiCo, Inc. (PEP). For example, the 1-year performance shows KO at 14.39%, MNST at 23.67%, and PEP at -16.62%. Over a longer 2-year horizon, KO has outperformed both MNST and PEP, with returns of 24.47% compared to 7.47% and -23.89%, respectively. However, over 3 years, KO has underperformed MNST but outperformed PEP.
- Risk and Return Analysis:
- The annualized returns indicate that KO provides lower returns than MNST but higher returns than PEP over a 1-year period. For example, the 1-year annualized returns are 14.39% for KO, 23.67% for MNST, and -16.62% for PEP.
- In terms of annualized volatility, KO generally exhibits lower volatility compared to MNST but similar volatility to PEP. For instance, as of June 27, 2025, KO has a volatility of 15.58%, MNST has 15.3%, and PEP has 17.76%.
- The maximum drawdown figures show that KO experienced a maximum drawdown of -17.27% on October 5, 2023, which is less severe than MNST's -26.04% on August 8, 2024, and PEP's -30.32% on May 14, 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 better risk-adjusted returns compared to PEP but not always compared to MNST. As of June 27, 2025, KO has a Sharpe Ratio of 0.82, while MNST has 0.93 and PEP has -0.93.
- The Beta values for KO are consistently below 1, indicating that it is less sensitive to market movements compared to its peers. As of June 27, 2025, KO has a beta of 0.07, MNST has 0.32, and PEP has 0.16.
- Overall Assessment:
- The Coca-Cola Co. (KO) presents a mixed profile when compared to Monster Beverage Corp. (MNST) and PepsiCo, Inc. (PEP). While KO offers lower returns than MNST, it also exhibits lower volatility and smaller drawdowns, suggesting a more conservative investment. KO consistently outperforms PEP in terms of returns and risk-adjusted performance. The lower beta of KO indicates that it is less sensitive to market fluctuations, making it a potentially stable choice in uncertain market conditions. Recent trends show decreasing volatility for all three companies, but PEP is currently experiencing a significant drawdown and negative Sharpe Ratio, indicating potential challenges.
Peers Fundamentals(as of 2025-03-31)
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Market Position and Size:
- The Coca-Cola Co. (KO) has the largest market capitalization among its peers, standing at $303,537.12 million, significantly exceeding Monster Beverage Corp. (MNST) at $59,487.99 million and PepsiCo, Inc. (PEP) at $178,843.68 million.
- Despite having lower revenue than PepsiCo ($46,669 million vs $91,522 million), KO's market cap is considerably higher, suggesting a premium valuation.
- KO's EBITDA is also lower than PEP's ($12,611 million vs $18,010 million), but its net income is higher ($10,784 million vs $9,370 million), indicating a potentially more efficient cost structure or lower tax burden.
- KO holds a dominant position in the non-alcoholic beverage industry due to its size and brand strength, despite having lower revenue than PepsiCo.
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Profitability and Efficiency:
- KO exhibits strong profitability with a Gross Profit Margin of 61.17%, outperforming both MNST (54.64%) and PEP (54.97%), as well as the industry average (42.78%).
- KO's EBITDA Margin of 27.02% is slightly lower than MNST's 27.43% but significantly higher than PEP's 19.68% and the industry average of 5.88%.
- Its Net Profit Margin of 23.11% is higher than MNST's 20.27% and PEP's 10.24%, and substantially exceeds the industry average of -1.81%.
- KO's superior profitability, particularly its Gross Profit Margin and Net Profit Margin, indicates efficient cost management and strong pricing power relative to its peers.
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Financial Health and Stability:
- KO has a Current Ratio of 1.1, which is lower than MNST (3.37) and the industry average (2.1), but higher than PEP (0.83).
- Its Quick Ratio is 0.89, lower than MNST (2.78) and the industry average (1.59), but higher than PEP (0.65).
- KO's Total Debt to Total Equity Ratio is 187.43, significantly higher than MNST (4.0) but lower than PEP (263.84), and higher than the industry average (60.06).
- Its Debt / EBITDA is 3.89, higher than MNST (0.1) and PEP (2.69), as well as the industry average (1.94).
- KO's liquidity ratios are lower than the industry average, and its debt levels are relatively high compared to its equity and EBITDA.
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Valuation and Market Perception:
- KO has an Enterprise Value To Sales ratio of 7.29, which is lower than MNST (7.49) but significantly higher than PEP (2.62) and the industry average (3.73).
- Its Enterprise Value To EBITDA is 26.99, lower than MNST (27.28) but significantly higher than PEP (13.34) and the industry average (21.52).
- KO's Price To Earnings ratio is 28.24, lower than MNST (40.27) but higher than PEP (19.18), and lower than the industry average (31.03).
- Its Price to Book Ratio is 11.58, higher than MNST (10.26) and PEP (9.74), but lower than the industry average (11.67).
- Its Price To Sales Ratio is 6.52, lower than MNST (8.04) but significantly higher than PEP (1.96) and the industry average (3.5).
- KO's valuation metrics suggest that it is highly valued relative to its sales and EBITDA.
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Cash Flow and Capital Management:
- KO has a Net Operating Cash Flow of $1,075 million, which is lower than MNST ($2,023.99 million) and PEP ($12,575 million).
- Its Total Capital Expenditure is $2,003 million, higher than MNST ($265.19 million) but lower than PEP ($5,307 million).
- Its Free Cash Flow is -$928 million, significantly lower than MNST ($1,758.8 million) and PEP ($7,268 million).
- KO's negative free cash flow is a concern, as it indicates that the company is spending more cash than it is generating from its operations.
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Growth and Future Prospects:
- KO shows consistently lower growth in Sales/Revenue, EBITDA, Net Income, and Basic Earnings per Share compared to the peer group average.
- KO's Free Cash Flow and Free Cash Flow Margin growth rates are significantly lower than the peer group average, with a substantial underperformance in the most recent year.
- KO's EBIT Margin growth is slightly higher than the peer group average.
- KO's year-to-year growth rates fluctuate significantly, as indicated by the high standard deviations in Sales/Revenue, EBITDA, Net Income, Basic Earnings per Share, Free Cash Flow, and Free Cash Flow Margin.
- KO's 3-year and 5-year CAGR figures are generally lower than the peer group average, indicating slower long-term growth.
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Potential for Investment:
- From an investment perspective, KO presents a mixed picture. Its strong profitability and brand recognition are attractive, but its negative free cash flow, high debt levels, and slower growth rates are concerning.
- While KO's market capitalization is the largest among its peers, its financial performance does not fully justify its valuation.
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Key Risks and Considerations:
- KO's negative free cash flow is a significant risk, as it indicates that the company is not generating enough cash to cover its expenses and investments.
- KO's high debt levels could pose a risk if it faces financial difficulties or if interest rates rise.
- KO's slower growth rates compared to its peers could limit its future potential and make it a less attractive investment.
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Overall Assessment:
- KO exhibits strong profitability and brand recognition, but its negative free cash flow, high debt levels, and slower growth rates raise concerns about its overall financial health.
- While KO's market capitalization is the largest among its peers, its financial performance is not proportionally superior, suggesting potential overvaluation.
- KO faces increasing competition and challenges in maintaining its market share and profitability.
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