Tonight on Fast Money (@cnbcfastmoney) we talked about Coke (KO, quote) as discussions swirl around whether they are about to bid for higher growth in the sector whether it be a prominent energy juice maker or juice company. 

Coke_KOMy view is Coke is just fine as it is.  

Regarding Monster: Coke does not need to overpay for Monster to get into a new segment late when we valuations have been rewarded already.  Monster trades at 33X current earnings, far in excess of the sector.  

Regarding their core businesses, people are too focused on secular headwinds in the North American Carbonated Soft Drink(CSD) segment. 

In short, investors do not need the industry to improve for Coke's shares to rally, they should merely focus on the a compelling valuation argument and a global model that is not breaking down, despite recent sequential weakness in the top line.   

Here are my core views: 

  • Asia pacific margins are ramping up and per capital consumption levels still offer upside to growth
  • Latin America already has reasonably high per capital consumption rates but expecting same North America style slowdown in Latin America is jumping gun. 
  • Latin America is 24% of operating income and the US is only 19% so concerns about slowing North America should be put into context.

Expect 6% EPS from Coke with a 2.4% dividend yield over the next couple years.

Coke trades at 18.5x earnings but offers higher EPS outlook than Pepsi.  Coke should be cautious about overpaying for Monster.


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