KO remains our top large‐cap beverage idea based on attractive valuation (27% return to PT), stable global volume growth (4‐5%) and under‐appreciated catalyst from higher concentrate pricing feeding through to profitability. Although shares continue to suffer concerns about weaker currency (already in our numbers) and US slowness, these look to be well discounted in the stock.
With regard to the $2.4 billion offer for Huiyuan, a Chinese juice company, Deutsche acknowledge the bid is expensive “by any criteria” and dilutive ($0.03-$0.04 worth). But the firm believes “gaining scale in this critical growth market trumps the high initial cost of the deal.” Translation: They’re overpaying.
Deutsche reiterates BUY on Coca-Cola (KO), target from $65 to $64.
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