You probably noticed how Chuck decided to stretch the fiscal accordion all the way back to 2000 to show how Coca-Cola (NYSE:KO) is an operating cash flow beast. That's probably intentional. The further in the past you go, the better Coke looks. The closer you get to the here and now, though, the uglier it gets for this fading pop star.
He went with operating cash flow, and let's stick with that. He points to a grand five-year number, but how's it been going lately, Coca-Cola? Not too fizzy, I fear. Operating cash flow grew by just 9.4% in 2004 and 7.6% in 2005. In my opening argument, I already pointed out how operating cash flow is actually clocking in lower so far in 2006.
Chuck feels that product lines like Minute Maid, Dasani, and Odwalla will help save the day for a less-carbonated future, but think about that for a minute. Juices and bottled water are difficult to brand, easy to replace, and -- more importantly -- not as kind on margins. It's one thing to ship out cheap, light syrup to soft drink bottlers. It's not the same economics with cumbersome water and juice products. We're also talking about commodities here. Have you ever met someone who won't drink bottled water unless it's Dasani? (Actually, there are people who won't drink water if it is Dasani, swearing it tastes as bad as tap water.) Care to pass on PepsiCo's (NYSE:PEP) Tropicana just because Minute Maid isn't available?
I find Chuck's cherry-tinted outlook to be artificially flavored. I think my fellow Fool is naive to expect 8%-to-9% long-term earnings growth for a company that is clearly decelerating. The trends bear that out, and even if he's somehow right and capital appreciation walks in lock-step with earnings, it's just not sustainable for a tired blue chip like this to consistently trade for more than 20 times earnings or 16 times operating cash flow.
His opening argument discussed the white hat brand of Coke, but just as even Disney (NYSE:DIS) is backing out of its Happy Meal deal with McDonald's (NYSE:MCD), once your brand gets tied to childhood obesity and diabetes, your best days are in a rear-view chemist mirror.
Even after all this, if you still disagree with the bearish case on Coke, you may want to check the Inside Value newsletter service to see what Philip thinks about Coke at the moment and explore dozens of other low-priced stock opportunities.
Think you're done with the Duel? You're not! Go back and read the other three arguments, and then vote for a winner.
Longtime Fool contributor Rick Munarriz drinks Diet Coke but is likely to drink less this year than he did last year. He does own shares in Disney. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
