Two iconic American companies are in process of restructuring after operationally underperforming, but which is the better buy right now: General Electric or Coca-Cola ? The answer may largely come down to what each company’s management is doing to generate value for shareholders.
Coca-Cola refreshes
General Electric’s negative exposure to the coronavirus pandemic is obvious — GE Aviation, with its aircraft engines and aftermarket parts, provides the largest portion of its earnings. But the ways that it’s impacting Coca-Cola are also deep, if less obvious.
The beverage company relies heavily on what management calls the away-from-home market — in other words, restaurants, hospitality and leisure destinations, etc. In fact, the away-from-home sales channels provide around half of Coca-Cola’s global revenue. In the third quarter, with away-from-home volume down by a mid-teens percentage, the company’s revenue and operating income fell 9% and 8%, respectively.
The declines in 2020 are masking the results of Coca-Cola management’s ongoing restructuring initiatives.
In a nutshell, CEO James Quincey is engaged in refocusing the business on growing its stronger brands and significantly improve marketing efficiency. The company recently announced it would be eliminating about 200 brands from its portfolio — about half of its total. In addition, Coca-Cola’s 17 global business units will be reorganized into nine operating units. The intent of that move is to speed up decision-making at the company.
