2023 has been a positive one for most members of the Dow Jones Industrial Average. But there are some notable exceptions. Roughly one-third of the 30 stocks that make up that index are down by 5% or more this year, while the Dow has gained 6% through mid-November.
Nike (NKE -2.62%) and Coca-Cola (KO 0.60%) are two of these Dow laggards, declining 9% and 10%, respectively, so far in 2023. There are some good reasons for these poor performances, of course, but they also reflect Wall Street's short-sighted focus on the next few quarters.
With that in mind, let's look at whether Nike and Coke could set your portfolio up for market-thumping returns in 2024 and beyond.
Winners and losers
Coca-Cola's momentum is much stronger right now. The beverage giant in late October announced that third-quarter sales were up 11% thanks to growth in its non-traditional portfolio that includes waters, teas, and energy and sports drinks. Gains in these areas helped offset softer demand in some of the biggest soda brands. Coke's double-digit revenue spike was powered by a balance between higher prices and rising sales volume, which is a good sign for future growth ahead .
Nike is stumbling through some bigger challenges in the footwear industry. An oversupply of products in recent quarters, plus slowing growth in China, resulted in weaker sales and earnings compared to last year. Nike's revenue was up just 2% in fiscal Q1, and pre-tax profit margin declined as well. Coke easily wins the growth matchup today.
The outlook
Both companies are bullish about the future, which means investors might be looking at attractive discounts for these stocks. Coke recently raised its 2023 sales outlook and is projecting about 11% growth this year following big gains in 2022. That forecast is a bit stronger than the 10% increase that rival PepsiCo is targeting.
And Nike has succeeded in getting inventory down to the right level even as it finalized a packed release calendar for innovative new products. Executives believe the company's coming launches will help push profit margins higher again while accelerating growth in 2024. "This is how we'll extend our leadership position and drive growth over the long-term," CEO John Donahoe told investors in late September .
Price and value
There are two clear benefits from the pessimism surrounding both stocks on Wall Street today. The first is a lower price, which lessens the risk that you'll overpay for these businesses. Coke is valued at 5.5 times sales and 23 times earnings, down from 6.5 times sales and 28 times earnings earlier in the year. Nike's valuations have declined as well, especially compared to peers like Lululemon Athletica.
While both stocks are likely to generate solid long-term returns from here, Coca-Cola seems like a more compelling buy. Earnings should be lifted over the next few years by the company's continued market share gains.
Shareholders' returns will be amplified by Coke's industry-leading profit margins, too. And its generous dividend yield is sitting at over 3% right now, while Nike's is just 1.4%. These factors should help make Coca-Cola a positive force in your portfolio despite Wall Street's lack of enthusiasm about the growth stock today.
