Investors are bracing for slower sales growth again in 2024.
Coca-Cola's (KO 0.34%) stock returns and its business are moving in opposite directions these days. The beverage giant just reported positive operating trends for fiscal 2023, and yet co*ke was among the weakest performers on the Dow Jones Industrial Average for the year. Shares have gained just 2% in the last 12 months compared to the Dow's 19% rally.
Does that performance gap pave the way for market-beating returns for investors willing to buy co*ke stock today? Let's take a closer look.
Sales trends
The biggest knock against co*ke's business is that growth has been less than sparkling. Sure, organic sales gains were 12% in 2023 on top of a 16% spike in the prior year. Yet this past year's increase came almost entirely from rising prices; co*ke's sales volume growth slowed to 2% last year from 5% in 2022. It's not a great sign for future sales trends that shoppers are scaling back on their soda purchases.
That soft momentum will likely continue into 2024 as well. co*ke is calling for organic sales growth to slow for a second straight year, declining to between 6% and 7% gains in 2024. Investors are hoping that the company can get back to double-digit expansion that includes both rising prices and higher sales volumes. For now, though they'll have to accept market share growth in a sluggish industry. Rival PepsiCois calling for just 4% organic sales gains this year.
Profit margins
co*ke is squeezing the most out of its slower growth profile, though, and that's great news for shareholders. Non-GAAP earnings jumped a healthy 16% in 2023 thanks to a combination of cost cuts, rising prices, and higher demand for non-core beverages like sparkling waters and energy drinks.
Those wins helped operating profit margin expand to a blazing 29% of sales, or nearly double PepsiCo's result. "We expect to see margin expansion [in 2024]," CFO John Murphy said in a recent conference call with investors.
Cash returns are another bright spot lifting shareholders' overall returns. co*ke generated about $10 billion of free cash flow in 2023 and returned nearly the same amount to investors through stock buybacks and a rising dividend.
The dividend payment has increased for over 60 consecutive years, giving co*ke one of the longest track records on the market. Cash flow is projected to drop in 2024, but that's mainly because of one-time tax payment issues. The long-term outlook is highly positive for co*ke's cash trends, and so investors can count on further steady dividend growth over the coming years (and decades).
The price cut
Happily, you can pick up co*ke's stock at a relative steal today. Yes, its price-to-sales ratio of 6 is about double PepsiCo's comparable metric. Yet investors were paying over 7 times sales for this business at several points in the past three years. The weak performance of the stock in the past 12 months reduces the risk that you'll pay too high of a price for this company.
Investors have to balance those positive factors against the likelihood that co*ke will report some softer sales trends in the short term. The stock might respond to that sluggishness by staying relatively weak through most of 2024, but that's a small price to pay to gain exposure to one of the strongest consumer staples companies on the planet. co*ke deserves a spot on most investors' watch lists for 2024 and beyond.
Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
FAQs
Key Points
Is Coca-Cola a good stock to buy now? ›
Fair Value Estimate for Coca-Cola
With its 3-star rating, we believe co*ke's stock is fairly valued compared with our long-term fair value estimate of $60 per share, which implies a 22 times multiple against our adjusted 2024 earnings estimate and a 2024 enterprise value/adjusted EBITDA multiple of 20 times.
How much Coca-Cola stock does Warren Buffett have? ›
Coca-Cola (KO -0.54%) is Warren Buffett's longest-held stock and one of his favorites. His holding company, Berkshire Hathaway, first bought shares of co*ke stock in 1988 and owns 400 million shares. The big news revealed at the Berkshire Hathaway annual meeting last week was that it had sold 13% of its stake in Apple.
Is co*ke stock recession proof? ›
Like co*ke, Walmart and Procter & Gamble are Dividend Kings in the consumer staples sector. But Walmart has a yield below 1.5%, and P&G has a yield of 2.4%. co*ke's dividend is particularly secure thanks to the company's recession-resistant business model.
What is the future of Coca-Cola stock? ›
Stock Price Forecast
The 12 analysts with 12-month price forecasts for KO stock have an average target of 68.33, with a low estimate of 60 and a high estimate of 74. The average target predicts an increase of 10.07% from the current stock price of 62.08.
What stocks are a strong buy right now? ›
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|---|
| Microsoft (MSFT) | 1.33 | Strong Buy |
| Bio-Techne (TECH) | 1.39 | Strong Buy |
| Alexandria Real Estate Equities (ARE) | 1.39 | Strong Buy |
| Emerson Electric (EMR) | 1.39 | Strong Buy |
21 more rowsCOLL Stock Forecast FAQ
Collegium Pharmaceutical has 13.87% upside potential, based on the analysts' average price target. Is COLL a Buy, Sell or Hold? Collegium Pharmaceutical has a consensus rating of Moderate Buy which is based on 1 buy ratings, 2 hold ratings and 0 sell ratings.
What would happen if I invested $1000 in co*ke 10 years ago? ›
You would have more than doubled your money, with a total investment worth of $2,029.55. That's a 103% return, or a 7.23% annual rate of return. Interestingly, despite co*ke's dominance on the world stage, investing in co*ke's main rival, Pepsi, 10 years ago would have given you more pop for your buck.
Why did Buffett invest in Coca-Cola? ›
In 2023, Buffett wrote that Berkshire's $1.3 billion investment in co*ke, made from the late 1980s through the mid-1990s, has been justified by the dividend payments alone. co*ke paid an annual dividend of $704 million in 2022. “Growth occurred every year, just as certain as birthdays.
Who is the biggest investor in Coca-Cola? ›
Top Institutional Holders
| Holder | Shares | Date Reported |
|---|
| Berkshire Hathaway, Inc | 400M | Mar 31, 2024 |
| Vanguard Group Inc | 369.36M | Mar 31, 2024 |
| Blackrock Inc. | 308.85M | Mar 31, 2024 |
| State Street Corporation | 169.69M | Mar 31, 2024 |
6 more rowsThe best recession stocks include consumer staples, utilities and healthcare companies, all of which produce goods and services that consumers can't do without, no matter how bad the economy gets.
Is Coca-Cola debt free? ›
As you can see below, at the end of December 2023, Coca-Cola had US$43.2b of debt, up from US$40.8b a year ago.
Does Coca-Cola have a lot of debt? ›
4As of December 31, 2021 and 2020, the fair value of our long-term debt, including the current portion, was $40,311 million and $43,218 million, respectively.
Is Coca-Cola stock going to split soon? ›
Coca-Cola didn't have an upcoming stock split on the docket as of mid-2023. However, the company has completed several stock splits throughout its history.
Will share a co*ke come back? ›
“We're excited to bring back 'Share a co*ke' this year, refreshed with more names and now last names.
Is KO a long-term buy? ›
Conclusion. KO has certainly proved its might in the past several years, retaining its top position in the industry. With its long-standing history of positive earnings trends, investors eagerly await the earnings release of this beverage behemoth.
Will Coca-Cola stock reach $100? ›
Coca-Cola stock would need to gain 58.87% to reach $100. According to our Coca-Cola stock forecast, the price of Coca-Cola stock will not reach $100. The highest expected price our algorithm estimates is $ 71.10 by Sep 6, 2024.
Is Coca-Cola a good dividend stock? ›
The business generates tons of free cash flow, to the tune of $9.7 billion in 2023. Even after investing in capital expenditures, there are a lot of resources left to fund dividends. The current 3.2% yield is healthy. But even more impressive, Coca-Cola has increased its annual dividend payout in 62 straight years.
Is dis a buy or sell? ›
Walt Disney has 28.25% upside potential, based on the analysts' average price target. Is DIS a Buy, Sell or Hold? Walt Disney has a consensus rating of Strong Buy which is based on 20 buy ratings, 5 hold ratings and 0 sell ratings.
What is the 5 year forecast for Coca-Cola stock? ›
Coca-Cola stock price stood at $62.96
According to the latest long-term forecast, Coca-Cola price will hit $70 by the end of 2025 and then $80 by the end of 2027. Coca-Cola will rise to $90 within the year of 2028, $100 in 2029, $110 in 2030 and $125 in 2033.
