The soft-drink industry and soft-drink stocks have been mixed bags as beverage makers struggle to engage millennials and Generation Z. Increasingly, younger people eschew sugary drinks for healthier alternatives. That hasn’t helped Coca-Cola (NYSE:KO), which obviously specializes in the sugary stuff. As a result, KO stock hasn’t done much for investors over the past two years.
But that could change very soon. Coke has intently focused on the younger demographic, seeking more effective means of engagement. One of the most noticeable efforts is its rebranding of Diet Coke Now being promoted using commercials that feature a tall, lithe can sparkled with bright colors, the new Diet Coke looks a lot different than the old one. Meanwhile, the soft-drink maker earlier this year introduced new flavors of Diet Coke, including ginger lime and feisty cherry.
Coca-Cola stock is up nearly 9% year-to-date. Plus, KO stock price closed up 1.4% yesterday. Notably, not just KO stock experienced a resurgence yesterday. Rival PepsiCo (NASDAQ:PEP) jumped almost 3%, while energy-boosting Monster Beverage (NASDAQ:MNST) gained a little over 1%.
That is encouraging news, but just how believable is Coca-Cola stock? After all, the iconic company is only just starting to provide shareholders with a reason to smile. While I acknowledge that Coca-Cola stock has had its difficulties, KO is finally making good on its potential.
Earnings Inspire Confidence in KO Stock
A day before Halloween, Coca-Cola released its third-quarter earnings report. Rather than a fright-filled affair, the beverage-maker fired on all cylinders, jolting the KO stock price above its horizontal range.
I can see why KO stock price rallied. Against analysts’ consensus earnings-per-share estimate of 55 cents, the company’s EPS came in at 58 cents. Coca-Cola also topped the consensus revenue estimate of $8.17 billion, as it reported a top line of $8.25 billion.
Of course, beating the earnings print is one thing. Convincing investors that “this time is different” is a whole different ballgame. The latter mission could be accomplished by the company’s Q3 beverage sales, which confirmed that its strategies have paid off.
Coca-Cola Zero Sugar was a huge success for the company, as its sales volume grew by a double-digit percentage. Furthermore, CEO James Quincy expressed satisfaction with Diet Coke’s sleeker packaging.
Altogether, the sparkling soft-drink segment grew 2%. It wasn’t just the healthy stuff that contributed to the top line. The company’s flagship beverage performed well, dispelling myths that millennials hate sugar. After KO reported strong earnings against a tough fundamental backdrop, investors can believe in Coca-Cola stock.
Coca-Cola Stock Is More Interesting Amid Higher Volatility
Even in the best of circumstances, Coca-Cola stock isn’t going to have sex appeal. Instead, KO stock provides stability and predictability, an anchor to prevent your portfolio from capsizing.
But as investors seek safe-haven assets amid the recent volatility increases, KO stock has suddenly become more interesting. While the 9% increase of KO stock this year isn’t something to write home about, under these jittery circumstances, significant gains are fairly rare. Plus, Coca-Cola stock has a fairly generous dividend yield of 3.2%.
Just as importantly, the company’s brand name is both renowned and respected. At a time when the U.S. might enter into a heated battle with the world’s second-biggest economy, KO stock can emerge from such a conflict unscathed. As Q3 confirms, most people throughout the world love Coke products.
Finally, if the worst happens and we enter a recession, KO stock price should remain mostly insulated. Drinking, like brushing your teeth or cleaning yourself after using the restroom, is not an optional endeavor.
Moreover, the company has already achieved its most difficult goal: reaching out to millennials. Moving forward, management simply needs to avoid doing something silly to keep demand for its products consistent.
The Technicals of KO Stock Confirm the Company’s Fundamentals
When it comes to predicting the ebb and flow of the KO stock price, I find myself agreeing with Investorplace’s James Brumley. He wrote:
Coca-Cola shares had been trapped in a trading range as of August, but that range was finally broken this week. Though we’re still likely to see some back-and-forth action, a lot of hard work has been done, and the bulls have tipped their hand.
Especially at this juncture, it’s important to consider logical investments. As I discussed earlier, Coca-Cola stock simply makes sense. The company’s most recent earnings not only comprehensively beat expectations, but they proved that its longer-term strategy has traction. And with KO stock, there won’t be any nasty surprises. That’s something even daredevil contrarians can appreciate.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.