The Coca-Cola Company (NYSE: KO) has not really enjoyed itself in the raging bull market of 2013. Its stock has managed gains of almost 11% so far this year, but that is only about half of the Dow Jones Industrial Average gains and only about 40% of the S&P 500 Index gains. As of Tuesday’s closing bell, Coca-Cola was listed as number 25 of the 30 DJIA stocks in performance.

Credit Suisse believes that is all about to change. The firm maintained its Outperform rating and its $48.00 price target on Wednesday. That implies upside of about 23%, plus Coke has a dividend that is now about 2.8%. What really stands out is that Credit Suisse is telegraphing that all the negatives and concerns are now more than reflected in the share price.

Credit Suisse’s Michael Steib initiated coverage of Coca-Cola back in June after the stock had closed at $40.41 (or $39.84 if dividend adjusted), versus a current price of $39.10. Today’s research note said”

The bear case is well-understood, easy to make and consensus: poor category dynamics, health concerns leading to reduced consumption in some DMs, EM exposure, FX headwinds, sugar tax in Mexico, to name but a few. We think that after a long period of underperformance vs S&P500 and peers, these concerns are more than reflected in the share price.

Steib points out that the worst-case scenario seems known. He sees consumption likely continuing to fall in the United States but with Coke gaining market share. He also expected some weakness in emerging markets, but sees improvements in Asia. Total emerging markets consumption rates are still low and offer significant longer term upside.

The health concerns remain significant, but industry efforts to further reduce sugar and calories in the portfolio should at least help address this with new product launches likely in 2014. Steib also believes that the refranchising agenda likely will be accelerated at the same time that supply chain efficiency gains are kicking in with a potential $1.5 billion of total system cost savings. Steib even sees up to 600 basis points in upside in Coca-Cola’s margins over the long term.

Credit Suisse lowered its 2013 earnings per share target by $0.01 to $2.09 to account for weak volume trends in Latin America. The 2014 earnings target was lowered to $2.23 per share from $2.27, and 2015’s per-share earnings target was lowered to $2.46, versus a prior target of $2.49. These cuts take into account the impact of the Mexican tax and slightly lower FX rates.

What is interesting is that Coca-Cola’s chart has never really recaptured its old highs from the 1990s, but that does not take into consideration the dividends, which have surpassed that on a dividend-adjusted price. Could Coca-Cola end up being a sleeper stock that outperforms in 2014?

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