Why are Coca-Cola Consolidated (COKE) stocks up 17% today?
The stock price of Coca-Cola Consolidated (NASDAQ: COKE) has bubbled up 17.65% today at the time of this article’s writing, popping to a high of $1024.76 per share this morning.
This comes after the company’s shares rocketed from $857.88 per share to over $1005 per share overnight yesterday. But why?
Over $3 billion in shares to be repurchased
On May 6th, Coca-Cola Consolidated published its latest quarterly earnings.
While most of the financial results themselves were fairly flat (for instance, only a 5% increase in operations income), the company also share some remarkable news at the same time: an enormous repurchasing plan of common stock shares.
Coca-Cola Consolidated said that it intends to purchase up to $3.1 billion in value of its common stock through both a modified “Dutch auction” tender offer for up to $2.0 billion of its common stock and a separate share purchase agreement with a subsidiary of The Coca‑Cola Company.
It said that it expects the price range for the tender offer to be $850 to $925 per share of Common Stock.
This means that Coca-Cola Consolidated has agreed to buy, and a subsidiary of The Coca‑Cola Company has agreed to sell a 21.5% stake of Coca-Cola Consolidated’s outstanding shares, once the offer has been completed.
Who is Coca-Cola Consolidated?
Not to be confused with Coca-Cola themselves, Coca-Cola Consolidated is the company that packages and bottles all products of The Coca-Cola Company, as well as drinks from other brands.
Coca-Cola Consolidated have been doing well recently. The company’s stock price is also up by more than 22% in the past week, and over 20% in the past month.
Greater debt, for greater EPS down the road
J. Frank Harrison III, the company’s CEO and chairman, said of the move that:
Our sustained strong performance gives us the confidence to announce our intended repurchase of up to $3.1 billion of our outstanding Common Stock. We believe this is an ideal time to leverage the strength of our balance sheet by taking on a prudent amount of debt to return cash to stockholders and build long-term value.”
Essentially, the company is taking on debt by repurchasing the shares, in order to be able to grow earnings per share (EPS) for the company in later quarters and thereby boost Coca-Cola Consolidated’s attractiveness.
Based on the past 24 hours’ performance, it seems to be working.
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