Rittenhouse Research
AI Infrastructure, Data Centers, Neoclouds, Software & Fintech Research
Coca-Cola looks like a short at about 25x forward earnings for a business growing revenue slower than nominal GDP. All of its recent earnings growth has come from cost efficiencies, and it should face huge headwinds from the appetite-suppressing drugs people are taking to stop eating. x.comÂ
Coca-Cola's forward revenue growth numbers are pitiful, yet the stock trades at 26x next-twelve-month EPS, which makes no sense. x.comÂ
Coca-Cola's retained earnings do little for shareholders when management does not distribute much of the growth. At 27 times earnings, a 2.3% yield with no expected large dividend hikes, special dividend or meaningful buybacks makes look-through earnings a poor basis for the price: EPS rose about $1 in five years while dividends rose only 52 cents. x.com x.com x.com x.comÂ
Coca-Cola's business is healthy, but its headline quarter overstates it, so the stance is bullish-neutral. Global volume rose 5%, free cash flow hit $6.9B year to date, and the dividend is covered at about 72% of free cash flow. But EPS grew 16% while currency-neutral comparable EPS grew 9%, underlying margin expansion was 24bp rather than about 90, and Asia Pacific price/mix fell 9% to defend shelf space. The raised 9-10% EPS growth guide includes about 3 points of currency tailwind. x.comÂ
Coca-Cola looks like a great funding short, since nothing makes it immune to the risks that battered its staples peers. GLP-1 drugs, store brands, new entrants and supply-chain inflation should hit it too, and non-sugar drinks only slow the U.S. decline, though international has held up better. About 2% revenue growth is thin support for 25x earnings while peers sit at 2008 valuations; it could fall to 15x unless the other staples rebound dramatically. x.com x.com x.com x.com x.com x.com x.com … Show more
Coca-Cola's valuation is no longer compelling despite strong operational execution. Shares trade at about 26.7 times earnings versus a historical average of 22.3, so much of the near-term optimism is priced in. Continued earnings growth can support the premium, but the margin of safety is considerably smaller. x.comÂ
Coca-Cola may be the best defensive stock on the planet, with the simplest business model and a brand known everywhere from New York City to tiny villages in Asia. x.comÂ
Coca-Cola's safe-haven premium has gone too far. It trades at more than double Ferrari's price-to-free-cash-flow multiple while having the same EBITDA margins and nearly half the expected growth rate. x.comÂ
Coca-Cola's $20 billion-plus tax liability under litigation is significant for a low-margin business; a billion-dollar tax penalty helped sink VF Corp. The stock has lagged the S&P 500 even from the best entries of the past 15 years, having run out of growth since globalization peaked, and its 2.67% dividend is weak against safe, growing alternatives. Spinning off and reacquiring bottlers has handed the alpha to others. x.comÂ
Coca-Cola is one of the best businesses ever built and will very likely still deliver investment results 50 years from now. It is far more than sugar water: it owns 500+ brands, including Dasani and Smartwater, and 32 billion-dollar brands. x.comÂ
Coca-Cola is losing current and coming generations, who are more health-focused and switching brands, even if it is safe from AI. Nobody in a personal circle drinks Coke, and the few Gen Z accounts followed on X are focused on health rather than drinking, though that may be a small sample. Per a UCSF doctor, the new generation drinks less alcohol and is more aware of the health damage. x.com x.comÂ
