Current Coca-Cola (KO -0.24%) shareholders can't be too thrilled with their pick's performance of late. The stock's priced below where it was a year ago thanks to a recent pullback mostly prompted by recently slowing revenue growth. Its repeated stumbles since early last year, in fact, call Coke's supposed money-making resiliency into question.
Just don't read too much into these setbacks. They're only short-term trouble. Indeed, you may want to use this most recent round of weakness as a buying opportunity. The organization's doing fine. You just have to take a step back and look at the bigger picture to see it.
Coca-Cola is a proven powerhouse
Coca-Cola is, of course, the world's biggest packaged drinks outfit, not only owning its namesake brand, but also familiar names like Barq's root beer, Dasani water, Gold Peak tea, and Minute Maid juices. It's always got something to sell.
Now, a diverse product portfolio doesn't inherently make for a great investment. In this case, though, the company's supporting its portfolio with 137 years' worth of proven history promoting beverages.
Case in point: A recent poll commissioned by Vistaprint's Promotique indicates Coca-Cola is the world's third-most recognized brand name, behind Apple and McDonald's. In a similar vein, numbers from TradingPlatforms.com puts Coke's U.S. brand strength score at 93.3 out of 100 -- the country's highest. The numbers loosely mean that Coke's most loyal customers -- and there are plenty of them -- will shrug off price increases to enjoy a familiar brand's offering.
Of course, owning a powerful large-scale brand name like Coca-Cola also helps the company's sales reps structure bigger deals and secure prime selling space with retailers and restaurants offering its products.
Cash, cash, and more cash
So why isn't the stock moving forward now? Good question. There's the aforementioned sales slowdown. Plus, last year's wave of inflation challenged Coca-Cola on multiple fronts including distribution, personnel, promotion, and even bottling costs (although the company offloaded most of its bottling operations to bottlers themselves, it's still handling some of this work on its own -- more on this below). Inflation rates are cooling, but costs are still rising year over year.
Mostly though, sometimes stocks just don't reflect the underlying company's reliable results.
These dips, however, are also often tremendous buying opportunities. That's arguably the case here. The bullish argument is in the numbers -- past and projected.
Coca-Cola boasts decades' worth of revenue and operating profit growth, with last year's $10.9 billion worth of operating income setting yet another record.
KO Revenue (TTM) data by YCharts
The analyst community expects Coke's top line to grow more than 4% this year before accelerating to more than 5% growth next year. That revenue growth should pump up 2022's bottom line of $2.48 per share to $2.61 this year en route to $2.81 per share next year.
More of the same is in the cards for the distant future, too, supporting a quarterly dividend that's not only been paid for decades, but also upped every year since 1962.
Data source: Thomson Reuters. Chart by author.
On that note, the dividend yield currently stands around 3%. Not bad.
But the revenue headwind that first took shape back in 2014? Don't sweat it. That's by design. That's when the company began selling most of bottling operations back to local and regional bottlers so it could better focus on licensing and franchising. In retrospect it was a genius, high-profit-margin move. Per-share earnings and operating income (as was noted) both continue to soar now that the charges linked to the refranchising effort are in the past.
Buy Coca-Cola stock at this price while you can
Is it a best first pick for new investors, or a growth powerhouse you want to build your portfolio around? No. There are companies out there capable of driving more growth. There are also higher-yielding dividend stocks out there.
Given Coca-Cola's long history of fiscal success and its well-entrenched brands, though, this stock's going to be at home in most people's portfolios. Defensive-minded investors would have to work hard to find a better balance of risk and reward, particularly after the stock's recent pullback.
