Standard & Poor's ups outlook on Coke

The ratings agency is positive on the beverage giant's strong operations and credit quality.

By Zacks.com Nov 1, 2011 1:28PM

Standard & Poor's has upgraded its ratings outlook on Coca-Cola (KO) on the back of the company’s strong operations and credit quality.


Despite the prevailing market turmoil, S&P upped Coca Cola's outlook to positive from stable and reiterated its "A+" long-term corporate credit and "A-1" short-term corporate credit and commercial paper ratings. The agency said it continues to expect robust performance from Coca-Cola even in the uncertain economy.


Coca-Cola reported strong operating earnings of $1.03 per share for the third quarter, a 12% gain from a year earlier, beating the Zacks Consensus Estimate by a penny. The results were boosted by strong growth outside the U.S. and in emerging markets. 


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The company also sold more beverages in each region during the quarter and continued to gain market share in North America from rival PepsiCo (PEP).


According to S&P, Coca Cola's acquisition of Coca-Cola Enterprises' (CCE) North American bottling operations has led to expansion and stands to benefit from the manufacturing and distribution efficiencies in the United States.


Additionally, the ratings agency stated that Coca-Cola has the ability to attain an annual revenue growth in the range of low- to mid-single digits, despite the ongoing pressure on its EBITDA margin. S&P also believes the company’s cash flows will be able to retain the credit quality to support a higher rating.


Coca-Cola currently holds a Zacks No. 3 Rank, which translates into a short-term hold rating. On a long-term basis, we maintain a neutral rating on the stock.

 

Read the full analyst report on "CCE"

Read the full analyst report on "KO"

Read the full analyst report on "PEP"

Zacks Investment Research

Tags: KOPEP
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