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Coca-Cola's Second Quarter Looking Good

By LouAnn Lofton (TMF Lou2)
July 3, 2000

Summary: Coca-Cola is still down from its 1998 highs, but the stock is up 38% since March, while flashy Internet companies have faltered. The company's announcement last week of increased second-quarter worldwide volume, along with an on-target earnings estimate, provides shareholders with just a few more reasons to hold this venerable company.

Coca-Cola (NYSE: KO), the world's largest soft-drink company, announced last week that it expects its second quarter worldwide volume to climb 5-6%. Pitching in for 1.5% of that gain will be brands acquired from Cadbury Schweppes. The company also affirmed the street's second quarter earnings estimate. The First Call/Thomson Financial estimate puts Coke earning $0.41 in its second quarter. This compares to $0.38 for the same quarter a year ago.

Coca-Cola shareholders have been smiling since March, as shares have gained 38% since then. The ride hasn't been straight up, but it still tastes good when noticing what the stocks of many e-commerce and Internet companies have done in the same time period.

As boring "old economy" Coke shares have gone from a 52-week low of $42 7/8 to the current $58 and change, shares of sexy companies like Amazon (Nasdaq: AMZN) and eBay (Nasdaq: EBAY) have drifted down. All three companies are off of their 52-week highs, but Coca-Cola is closer to its, at $69, than the other two. Both Amazon and eBay are down more than 50% from their 52-week highs.

Coca-Cola is still down big from the highs (in the $80s) it reached back in the summer of 1998. However, current shareholders should be pleased that investors seem to be turning again to Coca-Cola. The company's been relatively out-of-favor as the surge to own the newest and shiniest Internet companies has commanded the attention of investors for the past several years. Lately, though, it looks like some investors are choosing old, reliable companies like Coke over the high-flying Internet breed to help level out volatility.

Coke's announcement last week is likely to continue to provide even more strength to the stock. The company's efforts and growth overseas is still adding to the bottom line. The majority of the second quarter volume increase is coming not surprisingly from Europe and Eurasia. Also, in the past month, Coke was granted entry into North Korea for the first time. The number of countries not allowing Coca-Cola in is dwindling, and this is a good thing for the company and its shareholders.

The continued positive outlook for growth, along with a developing trend for some investors away from tech stocks and towards safer issues, may offer investors reason to continue holding the stock. Sure, Coke has seen better times, but lately it's been a performer. If market volatility continues to be an issue for investors, Coca-Cola may be just the thing they're looking for.

Your Turn:
What do you think? Is Coca-Cola making a comeback? Will the stock prove to be a safe haven for volatility-weary dot.com investors? Or is it just too old-school for words? Talk about it with other Fools on the Coca-Cola discussion board.

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