How To Trade Coca-Cola With Binary Options
The US earnings season is in full-swing, and Coca-Cola is set to announce its Q2 report on Tuesday 22 July. Shareholders will be looking for positive results following relatively sluggish growth in recent quarters amid declining demand for carbonated soft drinks in the US. Nevertheless, the company remains one of the most valuable in the world, and will be hoping to garner further attention after a heavy promotional campaign during the recent FIFA World Cup.
The bearish outlook for sugary drinks has been a drag on Coca-Cola's share price, which has trailed the overall market in recent quarters. Its stock price has risen 4.3% since the beginning of the year, and 7.0% over the past twelve months, compared to figures of 7.0% and 17.7% for the benchmark S&P 500 index (as of 18 July). According to Bloomberg, analysts have penciled in earnings per share of $0.63, and revenue of $12.8 billion for Q2 2014 – figures that represent little change from the $0.63 and $12.7 billion reported in Q2 2013.
Coca-Cola's attempts to boost profits have been hit by changing consumer tastes in its home market. Earlier this year, Beverage Digest noted that the volume of carbonated soft drinks sold in the US fell by 3% in 2013, marking the sector's ninth consecutive annual drop. Moreover, the 3% rate of decline was more than double previous falls in 2012 (1.2%) and 2011 (1.0%). Drinks companies were able to soften the blow by increasing prices by around 2%. Nevertheless, they were left with a 1% drop in total revenue – the first decline since comparable records began in 1998.
Declining consumer demand may suffer further from regulatory headwinds. A 12% tax on sodas was introduced in Mexico this January, which it is estimated will reduce sales by up to 7%. San Francisco will propose a similar tax on sugary drinks to voters in the fall. Elsewhere, New York's much-publicized ‘soda ban' on extra-large soft drinks was recently overturned by the city's Court of Appeals, but can still be voted through its council later in the year. Perhaps with these concerns in mind, Coca-Cola is aiming to focus increased effort on sales of non-carbonated beverages. After a 9% rise in Q1 2014, this sub-sector accounted for approximately 25% of Coca-Cola's global volume.
Despite its recent struggles, the drinks behemoth remains one of the world's most recognizable brands. This position is likely to have been aided by its advertising campaign during the recent FIFA World Cup. According to AdAge, Coca-Cola was the second most successful official sponsor of the tournament, trailing only Adidas. This marketing effort, which began earlier in the year, and is thought to have buoyed sales in Brazil during the first quarter, could provide tailwinds to sales in the second half of 2014.
Traders with a view on earnings releases, such as Coca-Cola's, can ‘buy' or ‘sell' binary options on the major US equity indices with contracts like the WallStreet30, US500, US Tech 100 via www.nadex.com. With short-term intraday contracts and fast-paced price movements, savvy traders may benefit from the increased volatility associated with earnings season. Meanwhile, should markets move in the wrong direction, the strictly limited-risk nature of binary options offers something of a safety net from unexpectedly large losses.
Futures, options and swaps trading involves risk and may not be appropriate for all investors.
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