Coca-Cola, the parent company of popular soft drink Coke, has proven enduringly successful over the years: It ranked No. 6 on Forbes’ list of the world’s most valuable brands in 2018, with a whopping $57.3 billion value.
The company has gotten its share of celebrity endorsements, too: Warren Buffett says he’s a “Coke loyalist,” and Berkshire Hathaway is a longstanding investor.
If you invested in the company 10 years ago, that decision could have paid off. According to CNBC calculations, a $1,000 investment in Coca-Cola in 2009 would be worth more than $2,800 as of Feb. 15, 2019.
While the company’s stock price has been largely steady over the past decade, though, any individual stock can over- or underperform, and past returns do not predict future results.
Shares fell Thursday and were on track for their worst day since the Great Recession. The company’s stock price fell 7.5 percent and its net sales fell 6 percent. (Net sales still topped expectations.)
Chief executive officer James Quincey told analysts that currency fluctuations, Federal Reserve interest rate hikes and changing tax rates could be responsible for the stock’s slide. “Clearly, that is leading to an [earnings per share] growth that is not what we aspire to,” he said.
He expressed similar concerns at the 49th World Economic Forum in Davos: “I think we are in the phase of 2019 where we are likely to see a little less growth. It is going to be a slightly tougher year in macroeconomic terms and we need to work our way through it.”
Some analysts see problems facing the traditional soda market overall. Ivan Feinseth, of financial firm Tigress Financial Partners, said on CNBC’s “Squawk Box,” that “there is no growth in carbonated soda,” and that brands like Coke and longtime rival Pepsi need to get creative.
They’ll need to “continue to develop or acquire other alternatives,” Feinseth explains, like sparking water, flavored seltzers, teas and sports drinks, since “that’s where the growth is, in the niche beverage markets.”
Coca-Cola does offer products besides sodas, and it continues to diversify its portfolio. The company made six new acquisitions in 2018, among them coffee chain Costa Coffee. They also own popular beverage brands Dasani, Minute Maid and Powerade.
And Quincey said on “Squawk on the Street” that the company will take time to “absorb” the investments it made last year.
Jim Cramer in January, suggested that worries about tougher years ahead could make the company a good buy, since stocks like Coca-Cola and Pepsi could do well during a potential downturn or in case of a stock market crash.
“You buy the stocks of companies that do well in a recession — even though I don’t think we’re going into one — that are also bolstered by lower raw costs,” Cramer said. He specifically highlighted Coca-Cola and PepsiCo: “They’re the safety stocks. That’s what’s worth owning.”
For fiscal year 2019, Coca-Cola is expecting organic revenue growth of 4 percent. “We are being prudent in our outlook for 2019 given the multiple reductions in global economic growth outlook for 2018 and our experiences in some emerging and developing markets,” Quincey said.
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