Things Will Go Better With Coke, Analyst Says

Coca-Cola Co. stock got some badly needed fizz Monday, as Merrill Lynch & Co. analyst Doug Lane said the soft drink giant will rebound next year as prices and sales volume rise and overseas markets pick up.

Shares of Coke (ticker symbol: KO), whose profit has fallen for four straight quarters, rose $4.88, or 8%, to $65.38 on the New York Stock Exchange.

The stock has risen from a 52-week low of $47.31 on Oct. 5. Chairman Douglas Ivester last month said key economies are starting to improve and that sales in Japan, the U.S., Mexico and Brazil--four of Coca-Cola’s top markets--are encouraging. The company is also expected to raise prices, helping to boost profit.

“If they can make these prices stick, then the Coca-Cola brand still has some power and it’s great for shareholders,” said Henry Asher, president of Northstar Group Inc., which owns Coke shares. “If it doesn’t, investors will be pretty disappointed.”

Coke’s stock has dropped 2.4% in 1999. The shares haven’t fallen for a full year since 1980.

Lane named Coke his top pick for next year as “global gets good again.” The Atlanta-based company gets more than half its sales and profit outside the U.S.

Global case sales, a key indicator of growth, are likely to rise 3% to 4% in the fourth quarter, Lane said.

Coca-Cola currently trades at about 50 times trailing per-share earnings. But at its average price-to-earnings ratio of the last decade, the stock would fetch about $75 a share, Lane said.

Schroder & Co. analyst Caroline Levy, who forecast a 3% rise in fourth-quarter case sales, raised her price target for the stock to $70 from $64.

“Sooner or later, Coca-Cola will recover,” said Fredric Russell of Tulsa, Okla.-based Fredric Russell Investment Management Co., which owns about 70,000 shares. “Whether it happens in a year or less is unimportant compared to the issue of world demand for its product. This is one of the world’s best names.”

Coca-Cola is likely to raise the price of the syrup concentrate it sells to bottlers 5% to 7%, Lane said.

Rival PepsiCo Inc. (PEP) said Monday that it will raise concentrate prices almost 7% next year. PepsiCo shares rose $1.81 to $36.31 on the NYSE.

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Coke and a Smile--Finally

Shares of Coca-Cola, which have been hammered since mid-1998 amid slumping profit, got a boost Monday from a Merrill Lynch report. Monthly closes and latest on the New York Stock Exchange:

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Monday: $65.38, up $4.88

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Source: Bloomberg News