Coca-Cola Earnings Preview: Still Searching For Growth?
The question for investors is whether Coca-Cola has maintained its momentum into the second half. They will have an eye on such things as commodity costs, conditions in the emerging markets and whether aggressive marketing efforts have paid off, in the period when the company expanded the roll-out of its new Coca-Cola Life product.
Analysts on average predict Coca-Cola will report that revenue for the quarter was fractionally higher year-over-year to $112.12 billion. Earnings of $0.53 per share are also in the consensus forecast. That would be the same as the reported profit per share in the comparable period of last year, as well as down from $0.64 in the previous quarter.
While the consensus earnings per share (EPS) estimate is the same as it was 60 days ago, and the individual estimates only range from $0.50 to $0.55 per share, Coca-Cola beat expectations in only one of the past four quarters, and then only by a penny.
In the second quarter, the company reported 3-percent global volume growth, and the CEO said, "While I am pleased with our progress to date, we remain focused on the work required to return our business to the level of sustainable growth we and our shareowners expect." The share price retreated about 2 percent in the days following the report.
Looking ahead, the analysts so far expect top and bottom line results that are essentially flat, relative to a year ago, for both the current quarter and the full year. They are perhaps taking a "wait and see" approach to the company's efforts, presented in its strategic plan earlier this year, to revive its growth.
The Coca-Cola Company is a global manufacturer, retailer and marketer of nonalcoholic beverages. Besides its flagship product, other brands include Fanta, Sprite, Dasani, Powerade, Minute Maid, Fuze and Odwalla. It offers more than 500 brands in all.
The company was founded in 1886, and its headquarters are in Atlanta. It is a component of both the Dow Jones Industrial Average and the S&P 500, and the company now has a market capitalization of about $188 billion. Muhtar Kent has been chief executive officer since July 2008 and chairman since April 2009.
Competitors include Dr Pepper Snapple, which later this week is expected to report small declines in third-quarter EPS and sales, and PepsiCo, which recently posted better-than-expected earnings, in part due to strong overseas sales, and boosted its guidance for the year.
During the three months that ended in September, Coca-Cola declared a dividend, entered into a partnership with Monster Beverage, expanded its agreement with Keurig Green Mountain, released its latest global sustainability report and pledged (along with its rivals) to reduce calories in its products.
Coca-Cola has a long-term EPS growth forecast of more than 7 percent, and its price-to-earnings (P/E) ratio is less than the industry average. The operating margin is greater than the industry average, the return on equity is more than 29 percent and the return on investment is more than 14 percent.
The number of Coca-Cola shares sold short, as of the most recent settlement date, represents less than 1 percent of the total float. That was up more than 8 percent from the short interest in the previous period, but down about 21 percent from the year-to-date peak in June. At the current average daily volume, it would take about three days to close out all short positions.
The consensus recommendation of the 24 analysts surveyed by Thomson First Call who follow the stock is to buy shares. Six of them rate the stock at Strong Buy. The analysts' mean price target, or where they expect the stock to go, is about 9 percent higher than the current share price. That target would be a new multiyear high.
The share price dropped less than three percent lower in last week's sell-off and stayed above the 50-day and 200-day moving averages. Shares are trading only marginally higher than 90 days ago. Over the past six months, the stock has outperformed the broader markets and PepsiCo.
At the time of this writing, the author had no position in the mentioned equities.
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