Coca-Cola CFO Says Trough Will Come In Q2, Says Bullish Credit Suisse

While lots of uncertainties remain for Coca-Cola Co KO, a FaceTime meeting with CFO John Murphy revealed that the food and beverage conglomerate expects performance to bottom in the second quarter, according to Credit Suisse.

The Coca-Cola Analyst

Kaumil Gajrawala maintained an Outperform rating on Coca-Cola with a $57 price target. 

The Coca-Cola Thesis

Coca-Cola’s performance may improve after the second quarter, with improving trends at quick service restaurants and better bottler commentary regarding May, Gajrawala said in a Thursday note. (See his track record here.)

Countries that were impacted by COVID-19 earlier are already improving, and the U.S. economy is reopening, the analyst said. These trends also support the expectation of the second quarter being a trough for the company, he said. 

The CFO indicated that Coca-Cola's focus is on increasing efficiency while remaining consumer-centric, Gajrawala said, adding that companies will embrace technology to revise processes and cost structures.

With consumers being forced to stay home, the company “expects to increase emphasis on affordability in emerging markets and less experimentation with small brands,” the analyst said. 

Coca-Cola will need to decide on where to invest and which bottlers and markets to be involved with, he said.

Referring to the liquidity situation, Gajrawala said the company had two debt issuances in March and April of a total of $12 billion, which will help prepare for the worst.

KO Price Action

Shares of Coca-Cola were higher by 0.92% at $44.10 at the time of publication Friday. 

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