Over the years, Coca-Cola (NYSE: KO) has earned its place as a beloved choice among investors owing to its unrivaled position in the beverage industry.
The company has consistently delivered impressive financial metrics characterized by robust profit margins and substantial cash flows. Furthermore, Coca-Cola has established itself as a reliable income investment by consistently increasing its dividend payout for an astonishing 60 consecutive years. It’s no surprise that this iconic stock has long been a cherished asset in Warren Buffett’s portfolio.
However, 2023 has been far from kind to Coca-Cola. The company’s performance has continued to deteriorate, and on Thursday, October 5, its shares reached a fresh 52-week low, following a 4.8% drop.
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What’s going on with Coke’s shares?
Coke’s latest pullback on Thursday comes amid a broader sell-off in the soft drink industry, with Pepsi (NASDAQ: PEP), Monster Beverage (NASDAQ: MNST), and others seeing similar declines on the day.
There is a chance the sale was prompted by concerns that weight-loss drugs such as Wekovy and Ozempic are encouraging customers to rein in their grocery spending and consume fewer calories.
Walmart (NYSE: WMT) CEO John Furner said the drugs are causing a “slight pullback in the overall basket.”
“Just less units, slightly less calories.”
– Furner added.
But from a broader perspective, Coca-Cola’s underperformance in 2023 comes mainly due to a struggling consumer staples sector.
Last year, consumer staples were among investors’ favorite categories to seek refuge from 4-decade inflation and market volatility. However, as those risks began to ease in 2023, the sector started seeing a massive investor exodus.
The Consumer Staples Select Sector SPDR Fund (XLP) lost just 3.3% in 2022, marking a significantly better performance than the SPDR S&P 500 ETF Trust (SPY), which fell around 19% last year.
This year, though, tables have turned, with the XLP down more than 8%, while the SPY sits at gains of 12.7%.
Additionally, other factors, such as sales slowdown in beverage and household products, also contributed to Coke’s decline. The deceleration comes as companies start to lose pricing power amid cooling inflation.
Coca-Cola stock price analysis
At the time of publication, shares of Coca-Cola were standing at $52.38, down 6.7% on the week and over 11.5% in the past month.
Year-to-date, Coke lost around 17.6%, heading for its worst year since 2008. KO is one of the worst-performing Dow Jones Industrial Average (DJIA) stocks in 2023.
Nevertheless, KO remains one of the analysts’ top picks in the beverage industry. The company reported better-than-expected Q2 earnings and sales, and hiked its full-year guidance. Moreover, Coca-Cola’s average selling prices rose 10% in Q2, despite a modest decline in US unit volumes.
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