Coca-Cola Continues to Get Its Ducks in a Row

Print Email

Coca-Cola Co. (NYSE: KO) and Anheuser-Busch InBev (NYSE: BUD) have announced that they reached an agreement regarding the transition of the latter’s 54.5% equity stake in Coca-Cola Beverages Africa (CCBA) for $3.15 billion. CCBA territories include South Africa, Kenya, Uganda, Tanzania, Ethiopia, Ghana and other African countries.

The companies also say they have reached an agreement in principle for Coca-Cola to acquire Anheuser-Busch’s interest in bottling operations in Zambia, Zimbabwe, Botswana, Swaziland, Lesotho, El Salvador and Honduras for an undisclosed amount.

The transactions, while subject to relevant regulatory and other approvals, are expected to close by the end of 2017, and Coca-Cola intends to account for the acquired stakes as a discontinued operation for reporting purposes.

It looks like Coca-Cola will be one of the 2017 Dogs of the Dow. So far in 2016, the stock was down about 3% on last look, while the Dow is up more than 13%. Coke’s post-election move has not been that impressive, as investors right now prefer growth and infrastructure, or those companies that can win more under the Trump plans.

Also of note, Chairman and CEO Muhtar Kent will be stepping down as of May 1, 2017, to be replaced by James Quincey, currently president and chief operating officer. Quincey previously served as president of Coke’s Europe Group, and as COO, he earlier this year put in place a new international operating structure and leadership team to make the company more efficient and effective at the local levels, helping operating units become faster and more agile.

Despite having more dependence on sugar-water beverages than rival Pepsi, the reality is that Coca-Cola has been diversifying away from its name brand for years. Its shares have mostly has been in a $39 to $44 trading band for the past three years. With global expansion opportunities and cost containment efforts, maybe value investors will begin to focus on what may be a defensive stock with limited downside — and it has raised its dividend for more than 50 years.

Shares of Coca-Cola most recently closed at $41.66. The consensus price target is $45.71, and the 52-week trading range is $39.88 to $47.13.