December 12, 2018

KO – Market expectations are for record-high Uniform ROA, but management has concerns about recent investments, scaling new brands, and currency headwinds


  • The Coca-Cola Company (KO:USA) is currently trading above corporate averages relative to UAFRS-based (Uniform) Earnings, with a 23.5x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about their recent acquisitions and investments, scaling new brands, and the challenging currency environment
  • Specifically, management is confident that they will see some volatility in the recovery of their emerging markets segment. They may also lack confidence in their ability to adjust their price/pack architecture in Argentina to maintain price points and affordability, and may have concerns about their recent acquisitions and investments, specifically their investments in global Venturing & Emerging Brands. Moreover, they may lack confidence in their ability to scale their newly acquired brands, and may be exaggerating the recovery of some of their struggling markets. Additionally, they may be exaggerating the success they have seen from their price increase strategy in the U.S. over recent years, and might have concerns about continued currency headwinds going forward
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