Credit Suisse Gets Bullish On Coca-Cola With Many M&A Opportunities Seen

In a research note this morning, Credit Suisse analyst Laurent Grandet upgraded Coca-Cola (KO) to Outperform, citing the arrival of incoming CEO James Quincey, who takes over next month, and the company’s nearly complete refranchising. Further, the analyst sees several strategic M&A opportunities to bolster Coca-Cola’s portfolio.

COKE TO BE SUCCESSFUL AGAIN: Credit Suisse’s Grandet upgraded Coca-Cola to Outperform from Neutral and raised his price target on the shares to $49 from $44. With incoming CEO James Quincey taking over on May 1, the analyst noted that the executive already revealed his desire to build a total beverage portfolio. Moreover, he pointed out that he has heard the phrase “total beverage company” a few times from Quincey and is encouraged by the more open approach to managing the company as an integrated beverages business, willing to go where the consumer wants with “new disruptive offerings.” Additionally, now that the refranchising is nearly complete, Coca-Cola is on the path to defining its “new frontier,” Grandet contended, adding that he thinks the company has “all the pieces in place to be successful again.” The analyst believes Coca-Cola’s key competitive advantages are the “strength and breadth of its global system,” its dominance in the on-premise channel that can be leveraged to roll out new brands and explore new categories, and its significant balance sheet flexibility to invest in the business and fill the gaps in the current portfolio.

M&A OPPORTUNITIES: Credit Suisse’s Grandet also told investors that he expects the new growth agenda will unlock revenue streams coming from existing regional winners such as Smartwater, Honest, Innocent, AdeS, and Georgia coffee. Moreover, the analyst noted that he sees several strategic M&A opportunities to bolster the portfolio and expand the global platform for future growth, potentially including AriZona, General Mills’ (GIS) Yoplait, La Croix, which is distributed by a subsidiary of National Beverage (FIZZ), and Monster Beverage (MNST).