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KO – Market expectations are for record-high Uniform ROA, but management may be concerned about their portfolio, product launches, and market share

April 29, 2021

  • The Coca-Cola Company (KO:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 32.7x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about their portfolio streamlining, new product and packaging launches, and market share declines
  • Specifically, management may lack confidence in their ability to maintain marketing cost savings, capitalize on smaller packaging in North America, and continue to attract new energy drink customers. Furthermore, they may have concerns about their market share declines, Topo Chico Hard Seltzer’s launch in the U.S., and persisting COVID-19 headwinds. Moreover, management may be exaggerating the benefits of their portfolio streamlining, innovation pipeline, and brand building efforts. Finally, they may lack confidence in their ability to meet their 2030 carbon target and focus on both short- and long-term performance