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Coca-Cola (KO) Up 19% in a Year: What's Driving the Stock?

Zacks Equity Research

The Coca-Cola Company KO is benefiting from its focus on consumer-centric innovation, solid core brand performance and improved execution in the marketplace. In the past year, shares of this Zacks Rank #3 (Hold) company have gained 18.7%, outperforming the industry’s growth of 17.3%.

These efforts also bolstered its quarterly performance in third-quarter 2019. Notably, the company’s top line surpassed estimates in third-quarter 2019, marking its ninth straight beat. Despite reporting in-line earnings in the third quarter, it has a robust bottom-line surprise trend of beating estimates in eight of the last 10 quarters. Additionally, revenues improved year over year on robust performance across all segments as well as growth in volume and price/mix.

Moreover, the company witnessed robust pricing and volume growth in the third quarter, which contributed to sales growth. Price/mix rose 6%, driven by revenue growth management initiatives as well as gains from a favorable geographic mix. Total unit case volume rose 2% in the third quarter on robust growth in developing and emerging markets. Strength in North America, driven by strong demand for Coca-Cola Zero Sugar, also boosted volume.

Backed by strong performance, and optimism on volume and pricing, Coca-Cola now estimates organic revenue growth of 5% in 2019. Comparable currency-neutral revenues are now expected to increase 12%, with 7% gain from acquisitions, divestitures and structural items. Comparable currency-neutral operating income for 2019 is now expected to increase 12-13%, marking an improvement from 11-12% growth stated earlier. Acquisitions, divestitures and structural changes will likely continue to positively impact operating income by low-single digits.

Additionally, Coca-Cola continually maintains relevance for the Coke brand in the evolving beverage industry through updates to the flagship product and its many variants. To this end, the company continually innovates as well as invests in core categories and brands. This mantra extends to all business aspects, ranging from massive categories like hot beverages to emerging ones like Kombucha.

Constant brand innovation is the key to the company’s sustained growth. Notably, its Coca-Cola Zero Sugar delivered double-digit growth globally for the eighth straight time in third-quarter 2019.

Recently, the company announced a partnership with Hard Rock International. The collaboration is aimed to introduce Coca-Cola's beverage portfolio to Hard Rock Cafes globally, beginning this year. The partnership between this beverage giant and the iconic entertainment, hospitality and dining company will likely present immense growth opportunities.

Notably, Coca-Cola has a solid portfolio of more than 500 sparkling (carbonated) as well as still (non-carbonated) beverages like water, enhanced water, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks.

We believe that these efforts and a strong brand portfolio will continue driving the company’s performance and help it sustain momentum.

3 Better-Ranked Beverage Stocks

Coca-Cola FEMSA, S.A.B. de C.V. KOF has a long-term earnings growth rate of 9.1%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Keurig Dr Pepper Inc KDP presently has an expected long-term earnings growth rate of 15.2% and a Zacks Rank #2.

Luckin Coffee Inc LK delivered a positive earnings surprise of 13.5% in the last reported quarter. Currently, it carries a Zacks Rank #2.

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Click to get this free report Coca Cola Femsa S.A.B. de C.V. (KOF) : Free Stock Analysis Report Coca-Cola Company (The) (KO) : Free Stock Analysis Report Keurig Dr Pepper, Inc (KDP) : Free Stock Analysis Report Luckin Coffee Inc. Sponsored ADR (LK) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research