Report Thursday, February 14 before the market opens
Revenue Expectation: $ 7.03 B
EPS: $ 0.43
Coca-Cola (NYSE 🙂 (NYSE: KO), both the company and the consumer line, rarely gets a boost from investors. Whatever the management of the soft drink giant moves to revive the growth, the company's shares are rewarded.
KO Weekly 1 Y chart
For example, in August, when the Atlanta-based company announced the acquisition of the British Costa Coffee chain, worth $ 5 billion, many analysts asked the high premium the company paid for the coffee chain. The deal was part of Coca-Cola's efforts to increase sales by diversifying from sugary drinks to premium, faster-growing categories.
Critics of the deal questioned Coke's ability to make the transformation work when smaller brands in the coffee market gained the most market share. But despite these doubts, KO shares performed better over the past year than comparable funds and the broader market. The stock, which closed at $ 49.66 yesterday, has risen nearly 20% in the last 12 months, significantly better than the Consumer Staples index, which dropped 3% over the same period.
The next big test of Coca-Cola comes on Thursday, when the liquor announces the profit figures for the fourth quarter. The consensus forecast requires $ 0.43 a share gain, compared to $ 0.39 per share a year ago. Revenue is expected to drop 6.4% to $ 7.03 billion for the same period.
Rebound in Diet Cola Demand
In the third quarter, the soft drink giant benefited from a recovery in demand for dietary cola; consumers returned to the low-calorie drinks they once despised. The global soda volume of the company grew 2% compared to the same quarter a year ago, thanks to the rising sales figures of Diet Coke and Coke Zero Sugar.
We expect a similar performance in the fourth quarter, given the strength of the company's brands helping with the turnaround strategy. The many smart moves of Coca-Cola in recent years have given the company a head start on peers.
Last year, it completed the sale of its bottling plants in the United States, effectively outsourcing a wide range of shipping and logistics tasks. That step should help Coca-Cola at a time when the costs in these areas are escalating, as a result of which profit growth is shrinking at many companies
On the product side, zero-sugar beverages have revived sales in North America, where the company saw double-digit growth for Coca-Cola Zero Sugar and Powerade Zero, as well as strong growth in premium watermarks such as Topo Chico and smartwater.
We believe these steps keep Coca-Cola well on track to meet changing consumer needs, while opening many new growth opportunities, especially after the acquisition of Costa. The British chain has 3800 stores worldwide and offers Coke a retail function in China and other parts of Asia, the Middle East, Africa and Europe. It also offers a hedge against the delayed sale of soft drinks.
Bottom Line
Despite the current challenges, Coke remains a solid dividend stock for long-term investors, with a return of 3.14% and a quarterly payout of $ 0.39. The company has now increased its dividend for 56 consecutive years.
As if the recent management moves and a reliable dividend is insufficiently confirming the strength of the company and its stocks, Coca-Cola owns 21 brands that generate $ 1 billion or more in annual sales – that is, from an astounding 500 global brands. We believe that Coke is a good defensive game, especially when the risks for growth stocks have increased and investors are playing safely.
