The Coca-Cola Company (KO), The Procter & Gamble Company (PG): What’s the Gates Foundation Betting On?

The Coca-Cola Company (NYSE:KO)

The Coca-Cola Company (NYSE:KO) reported mixed fourth quarter 2012 results, with EPS of $0.45 against the estimate of $0.44, while its top-line missed the expectation slightly on volume growth of 3% year-on-year against the estimate of 3.5%.

The company continues to feel pressure from its European operations, where revenue was down by 5% year-on-year. Its China business also displayed negative growth of 4% year-on-year in this quarter. On the other hand, its Eurasia and Africa business gained 10% year-over-year, and the North American segment displayed 1% year-over-year growth.

It seems the company was already aware of this downturn, as it started its four-year productivity initiative last February. Under this plan, The Coca-Cola Company (NYSE:KO) is investing in its bottling system, as well as brand positioning. The company is investing heavily in all of its brands in Europe.

Recently it increased its stake in the smoothie brand Innocent in the UK. Sales of this brand have increased by almost 100% in the last four years. Taking the productivity initiative as a whole, it’s expected to bring annualized cost savings of around $600 million by 2015.

Considering the above fundamentals and the macro headwinds which the company is currently facing, plus its decision to focus on re-franchising its US bottling assets after 2014 and 2015, I don’t think this would be the right time to invest in this stock. I would look for more information before taking any new positions and would recommend holding this stock.

Conclusion

Out of these three companies, I am more confident about the future prospects of Wal-Mart Stores, Inc. (NYSE:WMT) and P&G because of their expansion plans and innovations. P&G is doing well with Tide pods and other innovative products. Wal-Mart, with its focus on e-commerce and cost-saving plans, appears to be in a comfortable position.

On the other hand, I am a little doubtful about The Coca-Cola Company (NYSE:KO)’s growth in the long term because of macro headwinds and its decision to delay the re-franchising of its US bottling assets. I am neutral on this stock.

The article What’s the Gates Foundation Betting On? originally appeared on Fool.com.

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