Coca-Cola's Going Flat in More Ways Than One

A Coca Cola can flattened in the road next to a red route road marking in bright red paint, London, UK.
Barry Lewis/Alamy

A flat soda is bad, but for Coca-Cola (KO) investors, a flat stock chart is even worse. The world's largest beverage company's stock is trading marginally higher in 2014, and while that's enough to keep an impressive streak alive -- six consecutive years of higher closing prices -- it's undeniable that Coca-Cola's business is in a funk.

Sluggish soda sales that are being barely offset by growth initiatives in new beverage lines are taking a toll on Coca-Cola. Revenue and gross profit declined through the first nine months of 2014, and the former market darling is now cutting costs to keep its profitability on track.

Coca-Cola will be laying off as many as 2,000 employees in the coming weeks, sources are telling the Wall Street Journal. The days of shuttling execs around in fancy limos and springing for lavish Wall Street parties are being set aside for now.

The stock may be on a six-year winning streak, but Coca-Cola's going to have to bounce back if it wants to stretch that record to seven in 2015.

Taking Names

We're not drinking soda in this country the way we used to, and that's a problem for more than just Coca-Cola. Industry watcher Beverage Digest has been reporting shrinking consumption in the U.S. for nine consecutive years.

An occasional gimmicky rollout blurs the trend. For Coca-Cola, we saw that earlier this year with its "Share a Coke" campaign, which featured cans bearing names or terms of endearment. However, even with that kind of spike, we saw Coca-Cola's case volume shrink 1 percent in this country during the third quarter relative to the same period a year earlier.

Coca-Cola may consider itself lucky. Rival PepsiCo (PEP) saw its carbonated-soft-drink volume slip 1.5 percent in North America in its latest quarter.

A couple of years ago the concern could've been that folks were bypassing soda in bottles and cans to make carbonated beverages at home, but no one's making that argument now that SodaStream (SODA) is getting crushed. As uninspiring as it may be to see volume dry up slightly for Coca-Cola and PepsiCo through 2014, things are far worse at SodaStream, where revenue in the Americas plunged by 41 percent during the same quarter that saw Coca-Cola and PepsiCo shrink by just 1 percent and 1.5 percent, respectively.

Coca-Cola Wants to Pour It On

Layoffs and pulling back on executive perks will dent morale, but it's not fair to say that Coca-Cola is afraid to spend money. After all, 2014 will be the year that the market remembers as the one when Coca-Cola spent billions to acquire minority stakes in energy-drink giant Monster (MNST) and single-serve coffee leader Keurig Green Mountain (GMCR).

Caffeine-packed energy drinks and blasts of K-Cup java may seem like odd interests for Coca-Cola, but it knows that it can't live off pop alone. (Its 500-plus brands already include other types of drinks, such as Dasani water, Minute Maid orange juice and Fuze tea.) It's expected to post a slight dip in revenue and earnings per share for all of 2014 when it reports in February, and analysts see flat growth at both ends of the income statement in 2015.

That isn't going to work in the long run. Coca-Cola has one of the more impressive streaks on Wall Street in hiking its quarterly dividend for 50 straight years, but that is only sustainable if Coca-Cola's fundamentals begin moving in the right direction again. The past year was problematic for its fundamentals. The year ahead could be problematic for its shareholders.

Motley Fool contributor Rick Munarriz owns shares of Keurig Green Mountain and SodaStream. The Motley Fool recommends Coca-Cola, Keurig Green Mountain, Monster Beverage, PepsiCo and SodaStream. The Motley Fool owns shares of Monster Beverage, PepsiCo and SodaStream and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. Want a sweet deal? Check out our free report on our favorite high-yielding dividend stocks.