What new information can you expect from this 70th article? Well, I'll skip the quarter-by-quarter play-by-play today, and focus instead on the full-year results. We only get one chance at that per year, so we might as well take advantage of it.
And I'll focus less on the GAAP earnings to home in on cash profits. This way you'll (1) learn something new, and (2) sidestep the question of whether Coke "beat" or "missed" analyst estimates of "$0.55" per share -- with GAAP earnings coming in at $0.52, and pro forma at $0.58, you never really know.
As you'd expect, Coke's newer "still" beverages turned in the best growth last year, with volume rising 12%. "Sparkling" beverages -- namely, sodie-pop -- grew 4%. Put it all together and shake well, and we come up with total volume rising 6% year over year.
By way of comparison, that's half as good as what PepsiCo's
Revenue- and profitwise, Coke built on its strong volume growth by adding price increases and better product mix (i.e., selling a greater proportion of pricier pop). Currency exchange rates added a few more percentage points, and the biggest boost to revenue came from "structural changes related to bottler acquisitions."
Unfortunately, that last part was also the biggest contributor to Coke's costs. Relative to the year's 20% revenue growth, costs exploded 27% higher, with those "structural changes" accounting for more than half the higher costs.
Result: Gross margins for the year tumbled 220 basis points to 63.9%, and operating margins slipped 110 basis points to 25.1%. On the bright side, Coke grew its free cash flow this year by 21% to $5.5 billion.
And back to the dark side: That was faster than profits grew, but it still leaves Coke with cash profits significantly lower than what the company reports as net income under GAAP. It also leaves the stock trading for 25 times those cash profits. Call me a skinflint, but as impressive as Coke's performance was last year, that multiple's still too much to pay for what analysts insist will be a 10% grower over the next half-decade. That's my opinion, and I'm sticking to it.
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