Coca-Cola: Time to Take Some Profits?

Fundamentally, Coca-Cola's operation remains strong. Coke will likely post 2011 revenue growth of 15% to 20%, including acquisition revenue, after a 12% to 15% gain in 2010, boosted by impressive international sales and strong growth in noncarbonated beverages.

Efficiency improvements, adequate cost containment, and quicker-recovering emerging markets should offset higher commodity costs, rounding out the story of Coke leading the soft drink pack into another recovery.

Further, Coke has successfully repositioned itself amid the consumer trend toward health and sports drinks (POWERade, vitaminwater) and away from carbonated drinks. That said, the "big 4 carbs" -- Coca-Cola, Diet Coke, Fanta and Sprite -- are doing nicely internationally, thank you, which will more than offset sluggish volume in the signature cola brand in the United States. A nice $1.76 annual dividend rounds-out the positive story.

The First Call FY2011 EPS estimate for KO is $3.86.

Technically, Coke tested the $66 level in January before retreating to about $62, and the pullback looks like a healthy correction on the road to $70 and beyond.

2011 Outlook: I view Coke as a long-term play, but if you're looking to sell KO within the year, it's probably best to take your profits after it rises to $67 to $69, if it fails to clear $70.

Stock Analysis: I consider Coca-Cola to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in KO now, and I'd put a sell/stop loss at $43.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.