Click to Enlarge YTD Return: +16%
Not that a 16% rally in less than four months is unheard of, but for a consumer staples name like Coca-Cola (NYSE:KO), it’s definitely out of character.
It’s also out of character for a company that only posted a 4% increase in income last year, and is only on pace to grow the bottom line by 7% this year. Indeed, the 16% run-up has left shares priced at more than 22 times their trailing 12-month earnings.
It’s worth mentioning that Coca-Cola announced plans Wednesday to replace the bulk of its board of directors. Many of them are elderly, with a couple of them in their 80s. The new board will consist of younger directors, which some anticipate could update the company’s approach and direction. That might well happen, but there’s no guarantee a younger board will actually help invigorate slow sales growth. It will guarantee at least some disruption about how the company runs itself, however, and the transition itself could be accompanied by some growing pangs at a most inopportune time.