Cramer's Call: Coca-Cola CFO Gary Fayard
Coca-Cola is one of those companies that has its head in the game. When the market took a dive a couple months ago, Coke was at $45. It’s now been up 6 straight points and reported a profit jump of 14% to $1.26 billion last week. Cramer got Chief Financial Officer Gary Fayard on the phone to find out how the company was able to blow away the numbers.
Fayard points to growth across all of Coke’s key international markets. Coke saw 9% growth overseas and double-digit growth in emerging markets. Volume in the European Union was up 11%, he says, and that – together with trademark Coke sales up 4% - made for the impressive quarter. In addition, he says the introduction of Coke Zero has been a “phenomenon.” The product was introduced in 13 markets last year and will be in 40 markets by the end of 2007, he says.
Upon examination of Coke’s business model, Cramer says it’s clear that Coke isn’t much of a domestic company, even though people still seem to think it is, he says. Fayard says one of the most important markets the company is focusing on is Japan. He notes that Coke still only has 20% of the global market share in the non-alcoholic, ready-to-drink beverage market. There’s still plenty of room to grow, he says.
Cramer’s still curious about the stock price. There’s so much cash between the stock buybacks and the 2.5% dividend, he says. “Is it time to give a 3.5% dividend? The stock is still so cheap.”
The first thing to do is reinvest in the business, Fayard says, and then pay the shareholders. “The board declared a 10% increase in the dividend this year. That’s the 45th year in a row of increased dividends.” The plan is to continue to buy back stock and reduce the shares outstanding, he says. “We’ll buy back between 2.5 billion and 3 billion shares of Coke stock this year.”
With the stock finally moving, Cramer’s calling it the first inning for Coke. Fayard doesn’t think that’s too bullish a statement. With that said, Cramer recommends getting on board here at $51. “Coke is going much higher,” he says.