coca-cola company powerpoint
DESCRIPTION
Created 4/29/10TRANSCRIPT
Brad Schwer
The Coca-Cola Company
(KO)
Sector: Consumer StaplesIndustry: Soft Drinks
Recommendation: BuyEstimated Value: $58.31-$59.31
Current Price: $54.95
Company Information
• Fiscal year ends 12/31• Non-alcoholic • Carbonated and non-carbonated beverages• Headquarters in Atlanta, GA• Focus is on the syrup for beverages
– Sold to bottlers, distributors, and fountain retailers
Familiar Products
• Coke/ Diet Coke• Dasani (bottled water)• Sprite• Fanta• Vault (energy drink)• Powerade
Coca-Cola: Buy
18
14
1225
4
27
2009 Operating Profits by Segment
North America
Latin America
Corporate
Asia
Africa
Europe & Eurasia Middle East
Source: Edward Jones
Sales and EPS GrowthDEC DEC DEC DEC DEC DEC2009 2008 2007 2006 2005 2004
Revenue (in billions)
31.0 31.9 28.9 24.0 23.1 22.0
% Change -3.0% 10.7% 19.8% 4.3% 5.2%Baseline EPS
3.05 3.15 2.70 2.37 2.18 2.07
% Change -3.2% 16.7% 13.9% 8.7% 5.3%
•5-year compound growth rate in sales: 7.0%•5-year compound growth rate in EPS: 8.0%
SWOT Analysis
Strengths Weaknesses•Emerging markets•Non-carbonated beverages•Brand name
•Potential soft drink tax•Health trends•Increased competition•Questionable management
SWOT Analysis
Opportunities Threats•Emerging markets•Energy drinks•Non-carbonated beverages•Acquisitions
•Potential soft drink tax•Health trend•Increased competition•Foreign currency
Value Line ProjectionsFiscal Year Mar 31 Jun 30 Sep 30 Dec 31 Full Year
EPS 2010 0.68 0.99 0.93 0.80 3.40
Fiscal Year Mar 31 Jun 30 Sep 30 Dec 31 Full Year
EPS 2010 0.74 1.05 0.91 0.73 3.43
11.5% Yr to Yr Gain
12% Yr to Yr Gain
Baseline Projections
Value Line ProjectionsFiscal Year Mar 31 Jun 30 Sep 30 Dec 31 Full Year
Revenue (in billions)
7.6 8.9 8.9 7.4 32.8
Fiscal Year Mar 31 Jun 30 Sep 30 Dec 31 Full Year
Revenue (in billions)
7.9 9.0 8.6 7.7 33.0
Baseline Projections
7% Yr to Yr Gain
7% Yr to Yr Gain
P/E ValuationCompany Ticker EPS
Growth (5 yr)
Rev Growth (5 yr)
Beta Forward P/E
Dividend
ROE
Coca-Cola KO 8% 9% .71 16.0 3.2% 30%
PepsiCo PEP 11% 9% .68 15.9 2.7% 41%
Dr. Pepper Snapple
DPS 10% 4% .89 14.5 1.8% 17%
National Beverage Corp.
FIZZ 6% 4% .80 14.6 None 21%
Average Forward P/E for S&P 500: 14.5
P/E Valuation
• 5-year average P/E: 18• Forward P/E: 16• Averaged P/E multiple: 17x• Estimated projection: 17*$3.43
$58.31 per share
DCF Input Data Projection Period
2009 2010 2011 2012 2013 2014
Revenue$30,990.
0$33,469.
2$36,146.
7$39,038.
5$41,771.
2$44,695.
1Growth -3.0% 8.0% 8.0% 8.0% 7.0% 7.0%
EBITDA $9,467.0$10,208.
1$10,482.
5$11,711.
5$12,531.
3$13,408.
5% Margin 30.5% 30.5% 29.0% 30.0% 30.0% 30.0%Growth -2.1% 7.8% 2.7% 11.7% 7.0% 7.0%
Dep & Am $1,005.0 $1,085.4 $1,172.2 $1,266.0 $1,354.6 $1,449.5
EBIT $8,462.0$9,122.7$9,310.3$10,445.
5$11,176.
7$11,959.
1% Margin 27.3% 27.3% 25.8% 26.8% 26.8% 26.8%
Taxes $1,534.0 $1,656.7 $1,789.3 $1,932.4 $2,067.7 $2,212.4EBIAT $6,928.0$7,466.0$7,521.1$8,513.1$9,109.1$9,746.7Equity risk premium 8%
P/EBITDA multiple 13.0x
Valuation
• DCF intrinsic value: $59.31• P/E valuation: $58.31• Valuation range
$58.31-$59.31• Current stock price
$54.95 (Undervalued)
Pros Cons•Solid payout ratio•Increasing dividends•Cash position•Acquisitions•Stock buybacks
•Bottling acquisition’s North American focus•Lower margin acquisition•Regulations•Halting stock buybacks until CCE deal closes (4Q 2010)
Recommendation: BuyEstimated Value: $58.31-$59.31
Current Price: $54.95
Questions from the Board of Directors?
Appendix
Coca-Cola vs. PepsiCo (6-month)
Against the S&P 500 (6-month)
Foreign Currency ExposureCoca-Cola
• Generated 74% of net operating revenue from outside U.S.
• Uses 72 functional currencies• Currency impact on net revenue
2009: -11%• Uses derivatives to hedge
Forward contracts Purchase currency options
PepsiCo
• Generated 48% of net operating revenue from outside U.S.
• Currency impact on net revenue 2009: -5%
• Uses derivatives to hedge Forward contracts Commodity contracts
Acquisition
• Announced acquisition of North-American operations of Coca-Cola Enterprises (CCE) 75% of CCE’s volume
• $12.9 billion of equity and debt• Synergies of $350 million over 4 years• Assume $8.8 billion in debt• KO sells Norwegian and Swiss bottling
operations to CCE for $822 million