Coca-Cola's Q4 Earnings Gives Bulls a Reason to Smile

If you made me pick a stock that I I'd be forced to put 100% of my money in for the rest of my life, my choice would probably be Coca-Cola (NYS: KO) . (While I don't own Coke directly, it's been a CAPScall of mine and I own a considerable amount by way of Vanguard Dividend Appreciation and Berkshire Hathaway (NYS: BRK.B) , which owns 8.6% of the company.)

The reason is that Coca-Cola may be world's safest company because of its near-monopoly market position. And when making a large non-diversified investment, safety is key.

The only thing that would be even better is if the world's safest company was generating double-digit growth and could be bought at an attractive price.

And wouldn't you know it, it is.

The sweet earnings details
Coke reported earnings per share for Q4 of $0.72 and full-year EPS of $3.69. Since the shares are trading for $68.70, basic math tells me the stock is trading at 18.6 times trailing earnings. Not bad for a company as safe as Coke. To put that into perspective, the Vanguard Consumer Staples ETF (NYS: VDC) is trading at 16.5 times trailing earnings. But Coke's return of equity exceeds 40%, while VDC's is at 23.6%.

But it gets even better: Last year's earnings were somewhat unusual because of Coke's purchase of the North American operations of Coca-Cola Enterprises.

So when comparing apples to apples and taking out one-time items, Coke's EPS was up 10% for the quarter and the full year, at $0.79 and $3.84, respectively. This performance was fueled in part by explosive growth in China (volumes up 13%) as well as 19% energy-drink volume growth for the quarter.

And folks, for a mature market leader like Coke, 10% EPS growth is amazing. I'd argue that it's the equivalent of 20% growth for a normal company.

But Coke isn't just resting on its laurels. The company is implementing a cost-cutting program that aims to remove up to $650 million in costs by 2015. Those savings give it the flexibility to spend in other areas, like stacking up more resources behind advertising.

Ordinarily I'm suspicious of such initiatives, but the company has successfully delivered on such measures in the past. And to my knowledge, the quality of Coca-Cola hasn't suffered.

So I'd like to buy the world a Coke -- a share of Coke stock, that is.

Coke is easily one of the most recognizable brands in the world, perhaps even the most recognized. That sort of exposure can make it hard to get a beat on the company, as most expectations are built into the stock price. Fortunately, The Motley Fool has uncovered one incredible, and still largely undiscovered, growth story in Latin America. We're so excited about this stock that we've named it The Motley Fool's Top Stock for 2012. We've compiled a special free report for investors to uncover this top pick today. Get access now, but hurry, because it won't be free forever.

At the time thisarticle was published Fool contributor Chris Baines is a value investor. Follow him on Twitter, where he goes by@askchrisbaines. Chris' stock picks and pans have outperformed 93% of players on CAPS. He owns shares of Berkshire Hathaway and Vanguard Dividend Appreciation. The Motley Fool owns shares of Coca-Cola and Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway and Coca-Cola. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy

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