Assessment of Coca-Cola Consolidated (NASDAQ: COKE)

Overview: Coca-Cola Consolidated has shown remarkable performance over the past two years, significantly outperforming the S&P 500 index. As a marketer, producer, and distributor of Coca-Cola products in certain regions of the United States, the company serves a vast customer base and operates multiple manufacturing plants and distribution centers.

Financial Performance: In 2023, Coca-Cola Consolidated reported impressive financial results, with total revenue reaching $6.65 billion, marking a 7% increase from the previous year. Gross profit also saw a notable uptick of approximately 14%, amounting to just under $2.6 billion. Operating income surged by 30% to $834 million, demonstrating the company’s robust performance and nearly doubling its operating income over the past two years.

However, non-recurring expenses related to a previous acquisition and pension plan settlement weighed on the bottom line, resulting in lower pre-tax and net income compared to the previous year. Adjusted operating cash flow stood at approximately $900 million, reflecting strong underlying performance.

Balance Sheet Strength: Coca-Cola Consolidated boasts a strong balance sheet, ending 2023 with a net cash position of over $630 million and total long-term debt of just $599 million. This financial position provides the company with ample liquidity and flexibility for future investments and growth initiatives. Additionally, the company’s positive net interest income during 2023 further underscores its financial health.

Investment Thesis: With an EBITDA of approximately $1.01 billion, Coca-Cola Consolidated is trading at less than 8 times its EBITDA, making it an attractive investment opportunity. The company’s strong free cash flows and impressive free cash flow yield of almost 8% further support its investment appeal. Despite the recent special dividend payout, which was a positive development for shareholders, Coca-Cola Consolidated continues to generate substantial cash flows.

Consideration for Portfolio Management: While Coca-Cola Consolidated remains an attractive investment option, the decision to sell a portion of the position is driven by personal portfolio management goals, particularly the desire to increase cash holdings. Realizing gains from a stock that has almost doubled in value presents an opportunity to secure profits and rebalance the portfolio accordingly.

Conclusion: In conclusion, Coca-Cola Consolidated has demonstrated strong financial performance, robust cash flows, and a solid balance sheet, positioning it as an attractive investment choice. While maintaining a buy rating on the stock, the decision to sell a portion of the position aligns with personal portfolio management objectives. Overall, Coca-Cola Consolidated continues to exhibit strong fundamentals and growth potential in the foreseeable future.