Jefferies Lowers The Coca-Cola Co Price Target

Jefferies lowered its price target on The Coca-Cola Co KO Tuesday from $42 to $40 and maintained a Hold rating.

Analyst Kevin Grundy noted that “while fundamentals remain pressured and with FX now more onerous, KO still expects c. 4-5 percent FX neutral EPS growth in FY15.

“Though, we think Street FY15 EPS estimates are likely to come down by c. 4 percent on FX, valuation remains expensive at 20.2x CY15e P/E, and we see little in the way of catalysts to get the stock moving higher.”

Grundy commented that “FY15 remains a transition year. KO's last transition year (2005)- also saw the co. take down its LT targets and step-up A&M - led to material stock underperformance (1600 bps/800 bps vs. PEP/XLP). KO has similarly characterized 2015 citing a
need to invest and acknowledging the lower growth environment, which should limit the stock, in our view.”

“The company is making good progress (and enhancing its communication) in key areas where it needed to: (i) pursuit of growth assets (e.g. GMCR, MNST); (ii) productivity/stepped up brand investment; and (iii) improved pricing in NA,” according to the analyst note.

The firm lowered 2014 and 2015 Estimated EPS due to the stronger USD to $2.03 and $2.01, respectively. The new price target was “based on a 50/50 blended 19x CY3Q15e NTM P/E and 13.5x EV/EBITDA multiple.”

The Coca-Cola Co recently traded at $40.53, down 0.10 percent.