Coca-Cola Company Financial Analysis

Coca-Cola Company Background Information

  • The Coca-Cola Company, established in 1892, is primarily involved in the production and selling of syrup and concentrate for Coca-Cola.
  • This sweetened carbonated beverage is a cultural institution in the U.S. and a global icon of American tastes (Jones & Comfort, 2018). Other soft drinks and citrus beverages are also produced and sold by the company.
  • Coca-Cola is the biggest beverage manufacturer and distributor in the world, with over 2,800 brands distributed in over 200 countries (Chu, 2020).
  • It is also one of the largest companies in the United States.
  • The organization’s mission is to rejuvenate the world and make a difference.
  • There are such brands as Coca-Cola, Sprite, Fanta, and other sparkling soft drinks included in the company’s portfolio. Vitaminwater, Dasani, Topo Chico, Powerade, smartwater, Costa, Georgia, Gold Peak, Honest, and Ayataka are some examples of the company’s products.
  • The company’s portfolio is continuously evolving, due to the incorporation of certain innovations, such as reducing sugar in drinks and bringing new products to the market.
  • It aims to have a positive effect on people’s lives, cities, and the environment through water replenishment, packaging recycling, sustainable procurement practices, and carbon emission reductions across the value chain.
  • They hire over 700,000 people worldwide, thanks to their bottling partners, who help bring economic prosperity to local communities around the world

Financial Statements Analysis

Coca Cola Company Balance Sheet as of December 31, 2020

Particulars $ (in million)
Property, Plant, and Equipment 10,777
Long-Term Investments 20,085
Goodwill and Intangible Assets 28,550
Other Long-term Assets 6,184
Current Assets
Cash on Hand 10,914
Receivables 3,144
Inventory 3,266
Pre-Paid Expenses 1,916

Total Assets
87296

Particulars $ (in Million)
Shareholder’s Equity 21,284

Long-Term Liabilities 51,411

Current Liabilities 14,601
Long-Term Debts 40,125
Other Non-Current Liabilities 9,453

Total Liabilities and Shareholders’ Equity
87296

  • The number of all assets on a company’s balance sheet is known as total assets. Coca- Cola’s total assets for the year ended December 31, 2020 totaled $97.184 billion, a rise of 11.15 percent every year.
  • The total sum of all future claims against the company is known as total liabilities. Coca-Cola’s overall liabilities for the year ended December 31, 2020 were $76.868 billion, a rise of 15.16 percent every year.
  • Coca-Cola shareholder’s equity for the quarter ended December 31, 2020 was $20.316 billion, down 1.77 percent year on year.

Income Statement for the Period Ended December 31, 2020

$ (in million)
Revenue 33,014
Cost of Goods Sold 13,433
Gross Profit 19581

Expenses
SG$A Expenses 9,731
Other Operating Income or Expenses (853)
Operating Expenses 24,017
Operating Income 8,997

Total Non-Operating Income/Expenses 752
Pre-tax Income 9,749
Income Taxes 1,981
Income After Taxes 7,768

Other Income –
Income From Continuous Operations 7,768

Net Income 7,747
EBITDA 10,533

  • Coca-Cola’s gross profit for the quarter ended December 31, 2020, was $5.033 billion, down 8.52 percent year on year.
  • Coca-Cola’s operating income was $2.338 billion for the quarter ended December 31, 2020, up 8.04 percent year over year.
  • Coca-Cola’s pre-tax revenue for the year ending December 31, 2020, was $9.749 billion, down 9.61 percent year over year.
  • After taxes for the fiscal year ended December 31, 2020, Coca-Cola’s net income was $7.768 billion, down 13.54 percent year over year.
  • Coca-Cola’s net earnings for the year ended December 31, 2020, was $7.747 billion, down 13.15 percent year over year.

Cash-Flow Statement

For Year Ended December 31, 2020

Net Income/Loss
Total Depreciation and Amortization- Cash flow
Other Non-Cash Items
Total Non-Cash Items
Change In Assets/Liabilities
Total Change Assets/Liabilities
Cash flow from Operating Activities
Net Change in property, plant, and Equipment

Net Acquisitions/Divestitures
Net Change short term investments
Net Change in investments- Total
Investing Activities- Other
Cash Flow from Investing Activities

Net Long-Term Debt
Net Common Equity Issued/Repurchased
Net Total Equity Issued Repurchased
Total Common and preferred Stock Dividends Paid
Financial Activities – Other
Cash Flow From Financial Activities

Net Cash Flow
Stock-Based Compensation
Common Stock Dividends Paid

$ (in million)

7,768
1536
(150)
1,386
690
690
9,844
(988)

(863)
252
252
122
(1477)

(1,862)
529
529
(7,047)
310
(8,070)

58
126
(7,047)

  • A cash flow statement is a financial statement that indicates how changes in the income statement or balance sheet impact the amount of cash available to a business over time (Chiu, 2019).
  • Coca-Cola’s operating cash flow for the quarter ended December 31, 2020, was $6.220 billion, down 19.96 percent year over year.
  • Coca-Cola’s operating cash flow for the twelve months ended December 31, 2020, was $20.033 billion, down 3.16 percent year over year.
  • The net change in cash resulting from a company’s investments is known as cash flow from investing activities.
  • Coca-Cola’s cash flow from investment activities was $ 7.072 billion for the quarter ended December 31, 2020, up 81.29 percent year over year. Coca-Cola’s cash flow from investment activities was $-19.099 billion for the year ended December 31, 2020, up 145.02 percent year over year.

Stock Pricing Information

Calculating a company’s book value is more complex than determining its market value, but it can be much more rewarding. The market value of a company’s stock is determined by how much people are willing to pay for it. The book value is equal to a company’s net asset value, which fluctuates less than stock prices. Learning how to use the book value formula helps investors remain on track to achieve their financial objectives. In theory, it is what investors would get if they sold all of the company’s properties and paid off all of its debts and obligations. As a result, book value is nearly equal to the sum that stockholders would earn if they were to be liquidated. Just as reported in the NYSE on the close of 00 hours of March 26, the Coca-Cola Company’s stock price was $53.04.

Coca-Cola is one of the most well-known brands globally and one of the largest blue-chip corporations in the United States. Coke is a well-known dividend payer, and at first glance, it appears to be a good match for Money Unshackled’s portfolios, considering everybody’s need for steady passive income. However, in recent years, Coke has struggled in a modern world concerned with ethics and wellness, as well as a fragile global economy.

With more than 50 years of steady, stable dividend growth, dividend investors have reaped significant benefits from holding Coca-Cola stock (“Coca-Cola Co. (NYSE: KO),” n.d.). The latest annualized dividend payout for 2019 is expected to be $1.60, and it is paid quarterly, with 40 cents already paid in March 2019. The new yield on the stock is 3.38 percent, similar to what it has been in the past. Since a company’s yield percentage, like its share price, is uncontrollable, we focus on predictable dollar returns for historical analysis. However, as investors, we’d like to know what the current percentage rate of return is, and 3.38 percent isn’t alarming if we can add capital growth on top of that.

Risk and Return Analysis

Graph of KO Vs. SP500
Graph of KO Vs. SP500

Average Daily Returns

Average Daily Excess Return for MSFT KO                 -1.08

Average Daily Excess Return for SP500                       -1.06

In general, unlevered beta is lower than levered beta. When net debt is negative, however, unlevered beta can be higher than levered beta, meaning, the company has more cash than debt. This attributes into the average daily excess returns in the comparison with the market operational services (“Coca-Cola Co. (NYSE: KO),” n.d.). The average daily excess return of the Coca-Cola Company as stipulated in the graph is -1.08 as compared to the normal market operational of -1.06. In this case, the Coca Cola Company’s daily excess return is more negative than the normal market operational benchmark, indicating that the company is underperforming. However, S&P500 is just one of the more than 500 stocks and cannot necessarily provide the market volatility.

Beta for the Stock

Yahoo Finance Summary Section Beta              1.26

Beta from Above Graph                                      1.1028

Beta is a statistical indicator that compares a stock’s volatility to the broader market’s volatility, which is usually determined by a reference market index. The market’s beta is still the same because it is the benchmark. When a stock’s beta is greater than 1, it means that it is supposed to rise faster than the market in up markets and fall faster in down markets. When the market is rising, a stock with a beta lower than 1 is expected to rise less than the market, but falls less than the market when the market is dropping (Chiu, 2019). A stock can have a negative beta, which means it moves in the opposite direction of the overall market trend. The Coca-Cola Company shows a Beta of 1.1028 from the graphical analysis. According to this metric, The Coca-Cola Company’s volatility is comparable to market volatility.

References

Chiu, H., Fischer, D., & Friedman, H. (2019). Board diversity in audit and finance committees: A case study of Coca-Cola. In Diversity within Diversity Management (pp. 95-113). Emerald Publishing Limited.

Chu, B. (2020). Analysis of the Success of Coca-Cola Marketing Strategy. In 2020 2nd International Conference on Economic Management and Cultural Industry (ICEMCI2020) (pp. 96-100). Atlantis Press.

Coca-Cola Co. (NYSE: KO) (n.d.). Stock Analysis on Net. Web.

Jones, P., & Comfort, D. (2018). The Coca-Cola brand and sustainability. Indonesian Journal of Applied Business and Economic Research, 1(1), 34-46. Web.

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