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What are Coca-Cola’s Prominent Risk Factors Hinting At?

Story Highlights

With the help of the TipRanks Risk Factors tool, we try to decipher if Coca-Cola’s risk factors have the power to adversely affect its operations or not.

Founded in 1892, The Coca-Cola Company (NYSE: KO) has been refreshing generation after generation. Moreover, the stock has been quite resilient so far this year, navigating the wider economic turbulence quite effectively, and gaining marginally.

Further, the stock’s dividend yield of 2.86% is much above the sector average, offering investors certainty of income.

Meanwhile, Coca-Cola’s latest results for the first quarter were quite impressive, with both revenue and earnings witnessing year-over-year growth. Both revenues and earnings grew 16% from the previous year to $10.49 billion and $0.64 per share, respectively.

However, the clouds of macro-economic uncertainties continue to loom over the company, as inflation reaches its highest levels in four decades, making it increasingly difficult for Coca-Cola’s consumers to buy up its products. 

Keeping this in mind, let’s have a look at some of the major risk factors that are plaguing the company.

Risk Factors 

As per the TipRanks Risk Factors tool, Coca-Cola’s top risk categories are Production and Legal & Regulatory, which contribute 11 and 10 risks, respectively to the total 47 risks in the stock.

Under the Production risk category, Coca-Cola informs that supply-chain issues can be the cause of major headwinds for the company.

The company states that it remains vulnerable to any operational or systemic failure of its third-party service providers and business partners. The company goes on to say that its operational partners remain prone to different types of cybersecurity risks, privacy violations, and business interruptions. These may result in them not fulfilling their respective commitments, leading to financial losses for the company.

Meanwhile, when it comes to Legal and Regulatory risks for the company, it remains wary of uncertain regulations. Although the company remarks that its policies and procedures require strict compliance by its employees and agents with all U.S. and local laws and regulations, any unexpected action by the employees and agents can expose the company to litigation or legal proceedings, civil or criminal penalties, and reputational risks.

Notably, in a new risk added to the Macro & Political category by the company in its recent filings, it remarked that it remains prone to the adverse effects of the Russia-Ukraine conflict. Although it shut down its operations in Russia and limited its functions in Ukraine, the company opined that if the conflict continues to drag on it may have a material impact on its financial results eventually.

Stock Rating

Recently, Morgan Stanley analyst Dara Mohsenian reiterated a Buy rating on the stock with a price target of $76, which implies upside potential of 27.9% from current levels.

Consensus among analysts is a Strong Buy based on 12 Buys and four Holds. The average KO price target of $71 implies upside potential of 19.5% from current levels.

Positive Investor Sentiment

TipRanks’ Stock Investors tool shows that top investors currently have a Very Positive stance on KO. Further, 16.7% of the top portfolios tracked by TipRanks increased their exposure to KO stock over the past 30 days.

Conclusion

Coca-Cola remains vulnerable to some specific and some wider risk factors that can thwart the company’s prospects in the near term. Yet, the company’s strong brand value, operational strength, resilient stock performance, and solid financial position give it a strong shield to protect itself from the vagaries of the global economic downturn.

Disclosure

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