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Recommendation: BUY
Total Annual Return Est.:
3 year FV
5 year FV
33.8%
20.2%
Financial Snapshot:
Price
DCF Value
Buy Target
Sell Target
P/E
Forward P/E
Div Yield
Market Cap
52 Wk Range
EPS Growth
PEG
Credit
Current Ratio
$37.4
$85.16
$72.38
$97.93
17x
17.6x
2.6%
$173.76Billio
n
$32.37-$40.67
10.5%
0.1831
A++
2.23x
Shuang Han
October 19, 2012
Investment Thesis: The Coca-Cola Company has the high potential to be benefited from the
growing demand in the non-alcoholic beverage market. Coca-Cola shares have been a rewarding holding
so far this year, rising roughly 10%, versus single-digit gains for the broader U.S. benchmarks. The
company had constantly strong volume and value share growth in North America as well as in
International market. Coca-Cola gives investors a very high ROE, which is over 19% higher than other
beverage or similar companies return. The company has also increased their stock dividend every year
for almost 50 years straight.
Pros:
Coca-Cola was providing new share repurchase program of 500 million additional shares of the
Companys common stock, which will not impact the Coca-Cola's previously announced targeted
range of $2.5 to $3 billion in net share repurchases this year. (10/18/12)
The company announced that it has completed the transaction to acquire approximately half of the
equity in Aujan Industries beverage business, one of the largest independent beverage companies
in the Middle East. With the completion of the transaction, The Coca-Cola Company has acquired
50% of the Aujan entity that holds the rights to Aujan-owned brands, and 49% of Aujans bottling
and distribution operations. (09/24/12)
2
Shuang Han
October 19, 2012
Management Review: Muhtar Kent is Chairman of the Board and Chief Executive Officer of The
Coca-Cola Company, a position he has held since April 2009. Previously he was President and Chief
Executive Officer and earlier, President and Chief Operating Officer. In four years as CEO of the CocaCola Co., he has cranked up profits and trumped Pepsi in the beverage wars. Now Kent is shaking up
Shuang Han
October 19, 2012
Dr Pepper Snapple Group, Inc. (DPS). Coca-Cola has the highest growth margin and operating margin
among the three. It is the world's largest producer of soft drink concentrates and syrups, as well as the
world's biggest producer of juice and juice-related products. It enjoys a strong brand equity, which
provides it with an edge over its competitors while attracting and retaining a loyal customer base.
Risk Factors:
The Coca-Cola Company reported declined liquidity in the fiscal year ended 2011, which could
impact its growth and expansion plans.
Coca-Cola has been involved in some product recalls, which reflect the lax quality control of the
company. i.e. In November, 2011, the company recalled 88,000 themed drinking glasses for
quality reasons.
The Companys operations are subject to a number of laws and regulations by federal, state and
local Governmental entities and agencies in the US and other foreign countries, which may have a
material adverse effect on Coca-Colas business, financial condition or results of operations.
Coca-Cola reported increased operating costs in the fiscal year ended 2011, which affected its
margins.
Increase of raw material cost may have a major impact on the operational performance of the
company.
Shuang Han
October 19, 2012
Shuang Han
October 19, 2012
WACC Calculation:
Valuation Assumptions:
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