Coca-Cola Consolidated(US:COKE) fool.com·2024-05-20 12:15Core Viewpoint - Coca-Cola Consolidated has experienced significant stock performance over the past decade, with shares increasing by over 1,100%, outperforming the S&P 500's 184% return [1] Group 1: Historical Performance - The substantial gains for Coca-Cola Consolidated were largely due to a special situation involving acquisitions of distribution regions and manufacturing facilities from 2013 to 2017, which drove top-line growth [2] - The company's diluted earnings per share (EPS) have increased by more than 1,500% over the last 10 years, although this level of growth is atypical for a low-growth, low-margin business [3][4] Group 2: Current Financial Strategy - In 2023, Coca-Cola Consolidated's net sales increased by only 7% year over year, and its diluted EPS saw a modest decline, indicating that organic growth may be challenging in the future [4] - The company announced a stock buyback plan worth $3.1 billion, intending to repurchase approximately one-third of its shares, which is significant given its market capitalization of nearly $9 billion [5][6] Group 3: Shareholder Impact - The stock buyback plan is expected to benefit shareholders by increasing EPS, as fewer shares outstanding can lead to a higher stock price [6][7] - The company plans to optimize its balance sheet by raising a prudent amount of debt to fund the buyback, indicating a strong financial position [8] Group 4: Long-term Considerations - While using debt for share repurchases has been successful for other companies, there are concerns about the long-term implications for Coca-Cola Consolidated's balance sheet, especially after recently achieving a cash position greater than debt for the first time in 40 years [9][10] - The company possesses competitive advantages through its distribution rights for popular beverages, but finding growth may be difficult, raising questions about the stock's valuation at nearly 20 times earnings for a low-growth opportunity [11][12]