Coca-Cola Earnings: This Cash Is For You!

Cash return is the watchword for Coca-Cola investors

Feb 18, 2014 at 10:15AM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Following a good week for U.S. stocks, the market opened an abbreviated week mixed on Tuesday morning, with the benchmark S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES:^DJI) down 0.08% and 0.22 %, respectively, at 10:15 a.m. EST. Coca-Cola (NYSE:KO)released its quarterly earnings report this morning, while fellow Dow component Wal-Mart will do the same on Thursday. Investors will also be anticipating the Thursday release of the minutes of the Federal Reserve's January meeting, during which the central bank further reduced the size of its monthly bond purchases to $65 billion.


The market is not reacting well to Coca-Cola's earnings, sending shares down 3.6% at 10:15 a.m. EST. First, let's get to the headline numbers: Coca-Cola's comparable earnings per share for the fourth quarter came in at $0.46, up 2% year on year and exactly in line with Wall Street's expectations. Revenue, on the other hand, declined 4% year on year to $11.03 billion, 2% shy of the consensus estimate.

Coca-Cola ceased providing forward earnings guidance in late 2002 (more companies ought to do the same). Nevertheless, it has now managed to hit EPS estimates on the nose for the past three quarters (which makes me wonder if there isn't a bit of number massaging going on), with two earnings "beats" prior to that.

However, once you run your finger up the profit and loss statement, the record isn't quite as rosy: On EBITDA (earnings before interest, taxes, depreciation and amortization -- a crude measure of cash flow), Coca-Cola has missed estimates in four of the past five quarters (including this one); on revenue, it's three misses out of five.

Still, hitting or missing Wall Street's numbers isn't what ultimately creates shareholder wealth. Coca-Cola has been doing more than its bit to return cash to shareholders. In 2013, it paid out $5 billion in dividends and bought back $3.5 billion worth of shares, at the high end of its stated outlook of $3 billion to $3.5 billion. Add the two together and you get a total capital return of $8.5 billion; as such, the company paid through to shareholders every single dollar of cash flow it generated last year. In 2014, Coca-Cola is targeting net share repurchases of $2.5 billion to $3 billion. The shares ought to be analyzed (and bought) as a claim on a low-growth cash cow.

Coca-Cola is an icon of American business and it remains an extraordinary franchise. However, between its gargantuan size, changing consumer tastes, and rising public health concerns regarding sugar, high-quality growth will be increasingly hard to achieve. Investors can buy the shares as a relatively safe income vehicle, all the while keeping on eye on the risk factors I mentioned above.

9 stocks that will make you rich in the long run
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola. The Motley Fool owns shares of Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers