Analysts' sentiment toward The Coca-Cola Company (NYSE: KO) has been firming all year as evidenced by the rising price target. The Marketbeat.com consensus price target is up versus last year, last quarter and last month due to a growing number of increases and this trend should continue now that FY22 results are in.

The results and outlook favor shareholders interested in sustainable growth, dividends and dividend growth but did not provide a catalyst for higher share prices. The latest activity to show up on Marketbeat’s analysts-tracking pages occurred just a day before the Q4 results were released and suggested at least 2 sell-side analysts were ready to buy the stock on the post-release dip. 

The latest updates come from Goldman Sachs and UBS, which have the stock pegged at Neutral and Buy. This is consistent with the broader consensus of Moderate Buy, as are their price targets. Their targets average out to $66 compared to the $67 consensus target, which implies an 11% upside for the stock.

This shift in sentiment is consistent with institutional activity as well. The institutions have netted more than $6.65 billion worth of shares over the last year or about 2.5% of the market cap, with the stock trading near $60. Institutions hold nearly 70% of the stock and might continue to add to their positions given the dividend and distribution growth outlook. 

The Coca-Cola Company Succeeds Despite Headwinds 

The Coca-Cola Company had a good quarter boosted by higher realized prices, but headwinds continue to impair the results. The $10.1 billion in net revenue is up 6.3% versus last year on a 1% decline in global unit case volume offset by a 12% increase in price/mix at the organic level. The revenue beat the consensus estimate by a good 100 basis points.

Still, rising costs, 1-off events and other items that impact comparability (an extra day) take the shine out of the results. The company’s adjusted operating margin improved by 60 basis points, but not enough to offset the headwinds. This left the adjusted EPS at $0.45, which is not only flat versus last year but, as expected, which compares poorly to the top-line strength. 

The salient point is that earnings, cash flow and FCF are enough to sustain capital returns, CAPEX spending, debt reduction and planning for the future. The company reported $9.5 billion in FCF, down 15%, and a decline in cash on the balance sheet but also a reduction in debt, an increase in inventory, an increase in the dividend and share repurchases.

The guidance suggests these activities will continue in 2023 and includes an expectation for another $9.5 billion in FCF. The real takeaway from the guidance is the outlook for revenue and earnings, which are above the consensus estimate and should be supportive of the share price. 

The Coca-Cola Dividend, How Does It Stack Up? 

The Coca-Cola Company dividend is as attractive as it can be, coming with a 60-year history of distribution increases, a 2.9% yield and a 70% payout ratio. The pace of distribution increase isn’t that great, but enough to keep investors interested. The stock is highly valued because of the dividend, it trades near 25X earnings, but you get a reliable payment for the price. The closest competitor, PepsiCo (NASDAQ: PEP) offers similar metrics with the bonus of diversification into packaged foods and snacks. 

Turning to the chart, The Coca-Cola Company stock has been consolidating within a range for the last year and will most likely continue. The stock could move lower before it moves higher, but if so, it would improve the value and the yield.