BUSINESS
Coca-Cola Consolidated, Inc., together with its subsidiaries, manufactures, markets, and distributes nonalcoholic beverages primarily products of The Coca-Cola Company in the United States. The company offers sparkling beverages, such as carbonated beverages; and still beverages, including energy products, as well as noncarbonated beverages comprising bottled water, ready to drink coffee and tea, enhanced water, juices, and sports drinks. It also sells its products to other Coca-Cola bottlers; and post-mix products that are dispensed through equipment, which mixes the fountain syrup with carbonated or still water enabling fountain retailers to sell finished products to consumers in cups or glasses. In addition, the company distributes products for various other beverage brands that include Dr Pepper and Monster Energy.
INVESTMENT RATING
Reflecting future returns on capital that are forecasted to be above the cost of capital, COKE is expected to continue to be a major Value Builder.
Coca Cola Consolidated has a current Value Trend Rating of C (High Neutral).
The Value Trend Rating reflects very contradictory signals from PTR’s two proprietary measures of a stock’s attractiveness. Coca Cola Consolidated has a slightly negative Appreciation Score of 35 but a very high Power Rating of 87, producing the High Neutral Value Trend Rating.
Coca Cola Consolidated’s stock is selling at targeted value. The current stock price of $841.60 compares to targeted value 12 months forward of $846.
This moderately low appreciation potential results in an appreciation score of 35 (65% of the universe has greater appreciation potential.)
Coca Cola Consolidated has a Power Rating of 87. (This very high Power Rating indicates that COKE has a better chance of achieving attractive investment performance over the near to intermediate term than all but 13% of companies in the universe.)
Contributing to this very high Power Rating: recent price action has been extremely favorable. An offsetting factor is the Bottled & Canned Soft Drinks, Water comparison group is in a slightly weakened position currently.
INVESTMENT PROFILE
COKE’s financial strength is high. Financial strength rating is 83.
Relative to the S&P 500 Composite, Coca Cola Consolidated Inc has moderate Growth characteristics; its appeal is likely to be to investors neutral towards Income; the perception is that COKE is normal risk. Relative weaknesses include: low expected growth, and high earnings variability. COKE’s valuation is moderate: moderate dividend yield, moderate P/E ratio, and high price/book ratio. COKE has unusually low market capitalization.
CURRENT SIGNALS
Coca Cola Consolidated’s current operations are strong. Return on equity is rising, reflecting: widening pretax margins; rising tax keep rate; and rising leverage.
Coca Cola Consolidated’s current technical position is very strong. The stock price is in a 15.2 month up move. The stock has appreciated 125.5% from its prior low. The stock price is above its 200 day moving average which is in an uptrend.
ALERTS
Significant negative changes in investment behavior have recently occurred for Coca Cola Consolidated Inc (NASDAQ: COKE): negative upside/downside volume developed.
Coca Cola Consolidated Inc (NASDAQ: COKE). Slight positive changes in fundamentals have recently occurred: significant quarterly earnings acceleration occurred.
In light of this new information we are reviewing our current Overall Rating of C. This review will be completed in the next several days.
For its fourth fiscal quarter (ending December 31), Coca Cola Consolidated Inc (NASDAQ: COKE) has reported E.P.S. of $8.09 compared to $12.64 a year ago. For the latest four quarters through December 31, E.P.S. were $43.56 versus $45.88 for the same period a year ago.
On 2/21/24, Coca Cola Consolidated Inc (NASDAQ: COKE) stock rose modestly by 0.6%, closing at $841.60. Moreover, this advance was accompanied by above average trading volume at 121% of normal. Relative to the market the stock has been exceptionally strong over the last nine months but has declined -1.5% during the last week.
CASH FLOW
In 2022, Coca Cola Consolidated generated a very significant increase in cash of +$55.3 million (+39%). Sources of cash were much larger than uses. Cash generated from 2022 EBITDA totaled +$816.3 million. Non-operating uses consumed -$41.8 million (-5% of EBITDA). Cash taxes consumed -$131.1 million (-16% of EBITDA). Re-investment in the business amounted to -$353.1 million (-43% of EBITDA). On a net basis, debt investors pulled out -$208.4 million (-26% of EBITDA) while equity investors withdrew -$26.6 million (-3% of EBITDA).
COKE’s Non-operating Income, %EBITDA has experienced a downtrend over the period. This downtrend was accompanied by stability for the Coca Cola Consolidated Peer Group. In most years, Coca Cola Consolidated was in the third quartile and top quartile. Currently, Coca Cola Consolidated is substantially below median at -5% of EBITDA (-$41.8 million).
COKE’s Cash Taxes, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by stability for the Coca Cola Consolidated Peer Group as well. (Since 2018 Cash Taxes, %EBITDA has experienced a very sharp decline.) In most years, Coca Cola Consolidated was in the top quartile and lower quartile. Currently, Coca Cola Consolidated is lower quartile at -16% of EBITDA (-$131.1 million).
COKE’s Business Re-investment, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by stability for the Coca Cola Consolidated Peer Group. In most years, Coca Cola Consolidated was in the third quartile and top quartile. Currently, Coca Cola Consolidated is above median at -43% of EBITDA (-$353.1 million).
COKE’s Debt Investors, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Coca Cola Consolidated Peer Group. In most years, Coca Cola Consolidated was in the third quartile and top quartile. Currently, Coca Cola Consolidated is substantially below median at -26% of EBITDA (-$208.4 million).
COKE’s Equity Investors, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by an uptrend for the Coca Cola Consolidated Peer Group. In most years, Coca Cola Consolidated was in the second quartile and top quartile. Currently, Coca Cola Consolidated is below median at -3% of EBITDA (-$26.6 million).
COKE’s Change in Cash, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by stability for the Coca Cola Consolidated Peer Group. In most years, Coca Cola Consolidated was in the third quartile and top quartile. Currently, Coca Cola Consolidated is at median at +7% of EBITDA (+$55.3 million).
COKE’s Cash, %Revenue has exhibited little to no overall change over the period. This stability was accompanied by stability for the Coca Cola Consolidated Peer Group as well. In most years, Coca Cola Consolidated was in the lower quartile and third quartile. Currently, Coca Cola Consolidated is below median at +3%.
PROFITABILITY
COKE’s return on equity has improved very significantly since 2013. The current level of 29.6% is 2.05X the low for the period and is -12.0% from the high.
COKE’s very strong positive trend in pretax operating return significantly offset by a very strong negative trend in non-operating factors is a significant analytical factor.
The productivity of COKE’s assets rose over the full period 2013-2023: asset turnover has enjoyed a strong overall uptrend.
Reinforcing this trend, pretax margin enjoyed a volatile overall uptrend that accelerated very sharply from the 2021 level.
Non-operating factors (income taxes and financial leverage) had a significant negative influence on return on equity.
COKE’s return on equity is at the upper quartile (29.6%) for the four quarters ended September, 2023.
Operating performance (pretax return on assets) is upper quartile (14.5%) reflecting asset turnover that is slightly below median (1.59X) and upper quartile pretax margin (9.1%).
Tax “keep” rate (income tax management) is at the lower quartile (75.1%) resulting in after tax return on assets that is upper quartile.
Financial leverage (leverage) is at median (2.72X).
GROWTH RATES
There are no significant differences between Coca Cola Consolidated’s longer term growth and growth in recent years.
Coca Cola Consolidated’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth.
Annual revenue growth has been 15.2% per year.
Total asset growth has been 11.5% per year.
Annual E.P.S. growth has been 28.9% per year. (More recently it has been 127.2%.)
Equity growth has been 22.0% per year.
No consensus growth rate forecast is available for Coca Cola Consolidated.
Relative to the Coca Cola Consolidated Peer Group, Coca Cola Consolidated’s historical growth measures are generally top quartile. Revenue growth (15.2%) has been upper quartile. E.P.S. growth (28.9%) has been upper quartile. Equity growth (22.0%) has been upper quartile. Total asset growth (11.5%) has been at the upper quartile.
Consensus growth forecast is unavailable.
PRICE HISTORY
Over the full time period, Coca Cola Consolidated’s stock price performance has been variable and exceptional. Between April, 2013 and February, 2024, Coca Cola Consolidated’s stock price rose +1268%; relative to the market, this was a +339% gain. Significant price moves during the period: 1) September, 2022 – December, 2023: +125%; 2) February, 2020 – December, 2021: +215%; 3) May, 2018 – August, 2019: +164%; and 4) July, 2014 – October, 2015: +203%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of 73.7% is upper quartile relative to the S&P 500 Composite.
In addition to being upper quartile relative to S&P 500 Composite, current annual total return performance through January, 2024 of 73.7% is upper quartile relative to Coca Cola Consolidated Inc Peer Group.
Current 5-year total return performance of 33.0% is upper quartile relative to the S&P 500 Composite.
Through January, 2024, with upper quartile current 5-year total return of 33.0% relative to S&P 500 Composite, Coca Cola Consolidated’s total return performance is upper quartile relative to Coca Cola Consolidated Inc Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, COKE’s overall valuation is low. The highest factor, the price/equity ratio, is above median. Ratio of enterprise value/assets is slightly above median. Price/earnings ratio is near the lower quartile. Ratio of enterprise value/earnings before interest and taxes is lower quartile. The lowest factor, the ratio of enterprise value/revenue, is lower quartile.
Relative to Coca Cola Consolidated Peer Group, COKE’s overall valuation is high. The highest factor, the ratio of enterprise value/revenue, is upper quartile. Ratio of enterprise value/assets is upper quartile. Price/equity ratio is upper quartile. Price/earnings ratio is at median. The lowest factor, the ratio of enterprise value/earnings before interest and taxes, is at the lower quartile.
Coca Cola Consolidated has a major value gap compared to the median valuation. For COKE to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 1.18X to 0.59X. If COKE’s ratio of enterprise value/revenue were to fall to 0.59X, its stock price would be lower by $-465 to $376.
For COKE to fall to lower quartile valuation relative to the Coca Cola Consolidated Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 1.18X to 0.45X. If COKE’s ratio of enterprise value/revenue were to fall to 0.45X, its stock price would decline by $-578 from the current level of $842.
VALUE TARGETS
Reflecting future returns on capital that are forecasted to be above the cost of capital, COKE is expected to continue to be a major Value Builder.
Coca Cola Consolidated’s current Price Target of $852 is little changed from the current price of $841.60.
This moderately low appreciation potential results in an appreciation score of 35 (65% of the universe has greater appreciation potential.)
Notwithstanding this moderately low Appreciation Score of 35, the high Power Rating of 87 results in an Value Trend Rating of C.
Coca Cola Consolidated’s current Price Target is $852 (-5% from the 2022 Target of $898 but +1% from the 02/21/24 price of $841.60). This plateau in the Target is the result of a +22% increase in the equity base and a -22% decrease in the price/equity multiple. The forecasted decline in return on equity has a very large negative impact on the price/equity multiple and the forecasted decline in growth has a slight negative impact as well. Partially offsetting these Drivers, the forecasted decline in cost of equity has a slight positive impact.
PTR’s return on equity forecast is 31.4% — below our recent forecasts. Forecasted return on equity enjoyed a dramatic, erratic increase between 2014 and 2022. The current forecast is significantly above the 2018 low of 11%.
PTR’s growth forecast is 15.0% — in line with our recent forecasts. Forecasted growth enjoyed a dramatic, erratic increase between 2014 and 2022. The current forecast is significantly above the 2020 low of 5%.
PTR’s cost of equity forecast is 14.5% — in line with recent levels. Forecasted cost of equity suffered a dramatic, erratic increase between 2014 and 2022. The current forecast is well above the 2018 low of 8.8%.
At Coca Cola Consolidated’s current price of $841.60, investors are placing a positive value of $533 on its future investments. This view is consistent with the company’s most recent performance that reflected a growth rate of 16.0% per year, and a return on equity of 37.2% versus a cost of equity of 14.9%.
PTR’s 2024 Price Target of $852 is based on these forecasts and reflects an estimated value of existing assets of $318 and a value of future investments of $534.
Be the first to comment