To The Moon

Coca-Cola ( $Coca-Cola(KO)$)

Today’s recommendation is a stock that will be good for balancing your portfolios when the economy is showing signs of a recession looming. Coca-Cola is among the most recession-proof companies and is considered a good defensive stock to shore up when times are not looking good. Growing dividends especially during a recession shows that the company is well managed and its products are in demand even though the economy is slowing. Currently, Coca-Cola’s dividend yield is 2.95%, with annual dividend $1.76, and boasting a good record of 59 consecutive years of dividend growth. In fact, Coca-Cola is the 3rd-largest in Warren Buffet’s portfolio, after Apple $Apple(AAPL)$ and Bank of America $Bank of America(BAC)$. 

At the last quarterly earnings on April 25, 2022, the company reported that their net revenues grew 16% to $10.5 billion, and organic revenues (non-GAAP) grew 18%. Revenue performance included 7% growth in price/mix and 11% growth in concentrate sales. Concentrate sales were 3 points ahead of unit case volume, largely due to the timing of concentrate shipments in the current quarter, partially offset by the impact of one less day in the quarter. Operating margin, which included items impacting comparability, was 32.5% versus 30.2% in the prior year, while comparable operating margin (non-GAAP) was 31.4% versus 31.0% in the prior year. Cash flow from operations was approximately $620 million, a decline of $1.0 billion versus the prior year, as strong business performance was more than offset by the impact of cycling the timing of working capital benefits in the prior year and higher 2021 annual incentives in the current year. Free cash flow (non-GAAP) was approximately $400 million, a decline of $1.0 billion versus the prior year.

With regards to the outlook on the full year 2022, due to the suspension of its business in Russia due to the Ukraine conflict, the direct impacts are 1% reduction in case volume, 1% to 2% impact on net revenues and operating income, $0.04 impact to EPS (non-GAP). The company expects to generate free cash flow (non-GAAP) of approximately $10.5 billion through cash flow from operations of approximately $12.0 billion, less capital expenditures of approximately $1.5 billion.

From a technical perspective, the MACD still shows a short-term downtrend, but from the Stochastic indication, it indicates that the stock has been over-sold lately. Looking at the 200 daily moving average, the stock has been holding good support at the 200 MA level, and has just dipped below the 200 MA last week. The ideal price to look at this week would likely be around the low-50s to mid-50s.