OP-1A – Power Point Presentation
Example
Coke is it!
Craig Bench: Example
of a Company
Presentation
Coke is it!
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Coca-Cola is the world’s top soft drink producer
They manufacture, distribute and market over 300 different
nonalcoholic beverage concentrates--primarily soft drinks,
syrups, juices and juice drinks--in over 200 countries
Coke leaves the capital-intensive job of bottling to flagship
bottlers in various parts of the world
Nearly 2% of the daily global fluid intake involves Coke
products
Coke is a Buy
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I am assigning Coke a “Buy” Rating
Positive Factors
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The stock price of $55.71 (3/26) reflects some of the poorest
sales growth is recent history
 As global outlook improves, sales will rebound
Coke has had historical volume growth trends of 6-7% over
the last 50 years
 I expect a return to normal levels
Coca-Cola enjoys unrivaled global brand recognition
 BusinessWeek 2001 Survey rates them high
 It is a powerful global leveraging tool
Positive Factors
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Coca-Cola is well diversified
 They are diversified in both their beverage portfolio (over
300 brands) and in their global market penetration
 Douglas Daft, CEO, has pushed global “Get Local”
initiatives
In Mexico, the “Senzao” brand is a prime example
Positive Factors
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Their Expansion into China has been Successful
 Coca-Cola has successfully expanded their penetration
efforts into the crucial Chinese market
 China recently became Coke’s 6th largest market, up from
16th just ten years ago
 Coca-Cola’s Chinese volume has expanded 24% annually
for the last ten years and the company enjoys a 48%
market share of the CSD (carbonated soft drink) market
Valuation Support of “Buy” Rating
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Price (3/25/02):
Market Value ($millions):
Forward (2002) P/E:
Premium (Discount) to market P/E:
Premium (Discount) to Index P/E:
Company Type:
PE Relative Fair Value Range:
Intrinsic Value:
Recommendation:
$55.71
$117,262
32.8x
4%
(10%)
Stalwart
1.5-1.8
$70.49 (26.5%)
Buy
Valuation Support of “Buy” Rating
8. Relative Fair Value
a. Current Relative PE (Stock PE/Index PE)
Premium (Discount) to the market
2002
1.39
39%
2003
1.42
42%
2004
1.46
46%
b. Estimated Fair Value Range - Buy
Premium (Discount) to the market
c. Forecast S&P Market PE (x)
d. Stock EPS
$
Stock Price - Buy Below this Price (b * c * d)
1.50
50%
23.12
1.74 $
60.23
1.50
50%
21.51
1.82 $
58.85
1.50
50%
20.01
1.91
57.39
e. Estimated Fair Value Range - Sell
Premium (Discount) to the market
Stock Price - Sell Above this Price (e * c * d) $
1.80
80%
72.27 $
1.80
80%
70.62 $
1.80
80%
68.87
Recommendation
Buy
Buy
Buy
Negative Factors
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Coca-Cola has lagged in brand development of
growing non-core CSD market
 In Water, Isotonic, and Juices it has under-performed
 Pepsi holds market share in U.S. in each category
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Coca-Cola concentrates too much of their business
in core CSD’s
 While most companies are increasing their allocation of
non-core CSD’s, Coca-Cola has chosen keep most of its
eggs in the same CSD basket
Negative Factors
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Products are sensitive to the economic cycle
 Consumers tend to cut the fat out of their budgets when
times are lean, and Coke products are definitely fatty
 Key is the example from Germany
Earnings Estimates
Craig Bench
Goldman Sachs
Prudential Securities
Zachs Mean (std. Dev)
12/02
1.74
1.80
1.78
1.78(.02)
12/03
1.82
2.00
1.92
1.97(.03)
date
3/26
3/26
3/26
3/26
Questions?
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Any Questions?