Motley Fool Inside Value pick Coca-Cola (NYSE:KO), which surely needs no formal introduction, is reporting fourth-quarter earnings tomorrow morning. So pour a cup of your favorite fizzy drink, and soak in the company's place in the market.

What analysts say:

  • Buy, sell, or waffle? There are 17 Wall Street analyst firms following Coke these days. Nine of them see a bull case, there's a solitary bear, and the other seven are holding. In our Motley Fool CAPS investor community, it's a three-star stock with ratings by 768 players (as of this writing).
  • Revenues. $5.78 billion of syrup sales would satisfy the thirsty analysts. That's 4.1% more than the $5.55 billion taken in a year ago, or in other words, a whole lot of sugar water.
  • Earnings. The average forecast calls for $0.50 per share, up from $0.47 last year. But keep in mind that Coke has outperformed these expectations in each of the last 15 quarters, and hasn't missed a Wall Street target since Thomson started taking analyst polls.

What management says:
CEO Neville Isdell described the last quarter thusly, underscoring the global reach of the Coke brand:

"We continue to achieve strong growth in emerging markets, including Brazil, China, and Russia, as well as in other important markets across Latin America. At the same time, we have started the recovery in Japan and are addressing the softness in North America. We remain committed to achieving acceptable, long-term performance in these key markets."

What management does:
The margins on the income statement have been quite stable for some time, and are about as fat as they've ever been. Revenue growth is outpacing the 3.4% annual growth in the U.S. economy, and earnings are keeping up, by and large. But on the downside, you can see a weakening free cash flow trend, mostly because of unfavorable changes in working capital.

Margins

7/2005

9/2005

12/2005

3/2006

6/2006

9/2006

Gross

64.7%

64.6%

64.3%

64.8%

65.3%

65.8%

Operating

31.7%

31.5%

30.8%

30.9%

31.2%

31.5%

Net

21.8%

22.9%

21.1%

21.5%

21.9%

22.2%

FCF/Revenue

25.8%

25.4%

23.9%

20.6%

19.3%

19.2%


YOY Growth

7/2005

9/2005

12/2005

3/2006

6/2006

9/2006

Revenue

2.4%

4.8%

6.3%

5.5%

4.4%

4.2%

Earnings

0.0%

13.9%

0.5%

5.4%

4.7%

1.1%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Indeed, Coke is a worldwide powerhouse. Did you know that North American sales only provide about 25% of the company's operating profits? The real cash cow is currently Europe, where 35% of the profits have been made year-to-date, with operating margins north of 65%. It's enough of a geographic spread to warrant including Coke in your portfolio as a hedge against weakness in the U.S. market -- or any other single selling area, for that matter.

Competitors:

  • PepsiCo (NYSE:PEP)
  • Kraft Foods (NYSE:KFT)
  • Hansen Natural (NASDAQ:HANS)
  • Jones Soda (NASDAQ:JSDA)
  • Groupe Danone (NYSE:DA)
  • AMBEV (NYSE:ABV)

Coke is a Motley Fool Inside Value selection. Kraft is an Income Investor pick. Check out our entire suite of newsletters by clicking here.

Fool contributor Anders Bylund is a shareholder in Coke and Hansen Natural but holds no other position in any of the companies discussed here. He thinks that both of those companies should give him a couple of extra shares, just for buying so darn much of their stuff. You can check out Anders' holdings if you like, and Foolish disclosure is the pause that refreshes.