Coca-Cola: 30%+ Upside If Dollar Gains Revert In 2024/2025

Core Viewpoint - Coca-Cola is a strong global brand that continues to grow sales volumes despite challenges from private labels and currency headwinds, indicating a fundamentally sound business with potential for future growth [2][23]. Financial Performance - Coca-Cola's stock has underperformed the market by a factor of 4X since 2011, which may suggest a decline in competitive position despite improved profit margins and healthy sales volume growth [2][23]. - The appreciation of the US dollar has negatively impacted reported earnings, with a cumulative earnings loss of 31% since 2018 attributed to currency effects [7][22]. Revenue Generation - The majority of Coca-Cola's revenues are generated overseas, particularly in emerging markets where income levels are rising, allowing for continued unit volume growth [3][4]. - Currency fluctuations significantly affect reported earnings, as the dollar's appreciation leads to lower dollar amounts when converting international revenues [5][6]. Market Conditions - The dollar has appreciated by 23% from 2011 to 2019, continuing to impact Coca-Cola's earnings negatively, especially during periods of economic recovery and tighter monetary policy in the US [6][10]. - Expectations of Fed rate cuts in 2024 could lead to a weakening of the dollar, potentially improving Coca-Cola's reported earnings and sales volumes in international markets [9][10][18]. Future Outlook - Coca-Cola expects organic revenue growth of 8%-9% for FY2024, but currency headwinds are projected to halve reported figures, with an anticipated EPS contraction [19]. - The company is viewed as a stable investment with potential for long-term growth, especially if the dollar weakens, which is not currently priced into the stock [22][23].