Investopedia: The Marvel That Is Coca-Cola

By almost any measure, Coca-Cola (NYSE: KO) is a remarkable company. Not very many companies produce long term free cash flow margins of 20% or better, nor consistent returns on invested capital in excess of 20%. Even fewer companies manage to do it in the finicky and price-sensitive world of consumer goods. Consider, too, the fact that Coca-Cola is one of the largest companies in the world and is relatively undiversified, and yet still produces pretty solid growth on a consistent basis.

Even for those who find Coca-Cola to be too boring or too big for the portfolio, there is a lot to learn from following this company and watching how management continues to build value for shareholders.

A Surprisingly Solid End To The Year
From a top line perspective, Coca-Cola had a very good fourth quarter. Worldwide volume increased 6%, or about 5% excluding a deal with Dr Pepper Snapple Group (NYSE:DPS), with decent growth in North America (3%, excluding that deal) and Latin America, but strong performance in Eurasia/Africa and weakness in Europe and Asia. Interestingly, volumes in China were down 3 percent.

Coupled with a 2% increase in price and mix, and 37% growth from so-called "structural changes," Coca-Cola reported revenue growth of just under 45 percent. Excluding all of the special items and changes, core revenue growth of about 8% is still quite good.

In order to really plumb the details of Coca-Cola's earnings statement, readers and investors will probably need a glass of something considerably more potent than soda. For purposes of clarity, brevity and sanity, I will simply focus on some bottom-line adjusted conclusions. Operating income was up about 11%, with adjusted gross margin declining from 65.5% to 61.5 percent. Currency impacts account for how adjusted operating income could outpace revenue growth while the "adjusted" margin declined.


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