Coca-Cola (KO), like Walmart, has a powerful brand and an enormous reach. It also has a nice 2.8% dividend yield.
However, just like WMT, Coke stock also shares some unfortunate truths that can’t be overcome by its massive brand appeal. It has underperformed in 2013, with just 3% returns, and is down by almost 15% from its 52-week high above $43 in May.
Coke investors seemed to buy excuses about wet weather sapping sales in the spring, but another quarterly report full of disappointment rattled the stock this summer and really sparked declines.
The bottom line is that KO doesn’t have a lot of avenues for growth, and its legacy markets are mature at best and fading at worst. Consider that North American sales slipped this year — the first time in 13 quarters they had done so — as soda consumption continues to dry up amid a focus on healthier eating in the U.S.
A strong dollar also tends to weigh on Coca-Cola, with the currency’s relative strength estimated to shave 4% of the multinational’s operating profit this fiscal year.
The dividend is nice, and so is having Warren Buffett and Berkshire Hathaway (BRK.B) as a main holder of Coke stock. But that’s not enough to deliver profits in the next few months as this soda giant fights serious headwinds.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.