The Coca-Cola Company (KO), Others Blame it on the Rain

Ongoing risks

Meanwhile, over at Six Flags Entertainment Corp (NYSE:SIX), weather is an ongoing risk to the company’s business because when it rains, it keeps amusement-park goers away. In this case, adverse weather isn’t the worst of the company’s problems, as a tragic and fatal accident at its Arlington, Texas amusement park took the life of one of Six Flags Entertainment Corp (NYSE:SIX)’ guests last weekend. In discussing performance, the company’s president and chief executive Jim Reid-Anderson said:

I am pleased with our record year-to-date financial performance, despite cooler temperatures and unprecedented levels of precipitation at our Eastern and Mid-Western parks during the second quarter..

Unfavorable weather caused second-quarter earnings to fall 34% to $47.4 million versus $72.3 million in the year-ago period. The company’s income tax expense grew to $32.4 million from $1.2 million, weighing on results. Revenue fell 3% to $363.7 million, which was below consensus estimates.

Over the first half of the year, the company witnessed an increase in guest spending and a 1.0% increase in attendance. But that could certainly change. The ride is closed for now, and according to the company’s earnings call, “there could be a short-to-medium term effect” on attendance at the Arlington, Texas theme park.

The impact from the accident hasn’t yet surfaced in performance. Six Flags emerged from bankruptcy three years ago and shares have advanced nearly 35% in the past year. But there doesn’t appear to be a catalyst for further growth and there’s too much uncertainty following the tragedy. So I’m staying away, despite the fact that the company has paid $88 million in dividends in the first half of the year and repurchased $404 million in shares.

Six Flags Entertainment Corp (NYSE:SIX) is trading cheap at a 9.5 P/E ratio and it has a forward multiple of about 15. In the most recent quarter, the company generated $92.3 million in free cash flow but it has net debt of $1.2 billion.

Conclusion

With a forward PE of 19, The Coca-Cola Company (NYSE:KO) is fairly valued. For the investor whose patient, and can wait to see the results of the company’s reinvestment plan, I would hold on. Otherwise, PepsiCo is in growth mode and its successfully diversifying its revenue streams. Therefore, PepsiCo seems to be a more compelling opportunity at the moment.

The article Coca-Cola, Others Blame it on the Rain originally appeared on Fool.com and is written by Gerelyn Terzo.

Gerelyn Terzo has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo. Gerelyn is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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