By
Chimamanda U. Martha
October 24th, 2023
It is world wide known that Coca-Cola is one of the best-performing Dow stocks over the last year, up 15 percent while the index has risen around 4 percent in the same period.
The beverage behemoth has popped 5 percent in the last two weeks, and one top technician expects the rally to continue when it reports earnings this week.
We are all aware that the stock has long been looked upon by investors as a steady reliable investment. Each year the company would produce higher revenue and profits and share that by returning capital to stakeholders.
However, Coca-Cola has been seeing declining revenue trends that are concerning. Investors looking for that reliable performance can probably still count on Coca-Cola, but at this time shares are quite expensive. For investors who would love to own a stake in the company, waiting for a pullback will be fundamental in driving returns.
Carter Worth, head of technical analysis at Cornerstone Macro, said:
“What I find interesting is that this sell-off [into the Dec. 24 lows] basically comes down and finds support, plus or minus, and comes to life. Finally, if you leave the bottom trend line on and put in a descending upper line, you have the set-up that I think is, ultimately, the breakout. Simple chart, simple breakout bet, earnings coming, and I like Coke long,”
The Coca-Cola Company (KO) is, as said, scheduled to announce its fourth-quarter earnings results on February 14. The thing is that Coca-Cola exceeded analysts’ expectations in each of the first three quarters of the year. The company’s volumes have been improving on a year-over-year basis backed by its efforts to innovate better beverages with low- or no-sugar options. Coca-Cola’s marketing efforts have also helped it to enhance its volumes. Coca-Cola’s unit case volumes grew 2% in the first nine months of 2018 led by strength in the trademark Coca-Cola brand.
Coca-Cola is also innovating new flavors to address changing consumer tastes. Effective February 25, the company will offer Orange Vanilla Coke and Orange Vanilla Coke Zero Sugar in the US market. After over a decade, the company is offering a new flavor under its trademark Coca-Cola brand.
Stock Movements and Analysts’ Ratings
As of February 10, Coca-Cola stock was rated as a “buy” by 13 out of 24 analysts (or 54%). Eleven analysts had “hold” recommendations on the stock, while none had “sell” recommendations. Following the company’s third-quarter earnings results in October, there has been only one change in analysts’ ratings for Coca-Cola. On December 13, UBS lowered its rating for Coca-Cola from a “buy” to a “neutral” but raised its price target to $51 from $50.
An average price target for Coca-Cola stock was $51.88, BUT it was implying a potential rise of ~5%. From that, Coca-Cola stock has risen 4.5% since the start of 2019, better than the 2.3% rise in PepsiCo (PEP) stock but worse than the 8.0% rise in the S&P 500 Index as of February 9.
Coke has an Earnings ESP of +0.88% at the moment, suggesting that analysts have grown bullish on its near-term earnings potential. When you combine this positive Earnings ESP with the stock’s Zacks Rank #3 (Hold), it shows that another beat is possibly around the corner. The company’s next earnings report is expected to be released on February 14, 2019.
With the Earnings ESP metric, it’s important to note that a negative value reduces its predictive power; however, a negative Earnings ESP does not indicate an earnings miss.
Many companies end up beating the consensus EPS estimate, but that may not be the sole basis for their stocks moving higher. On the other hand, some stocks may hold their ground even if they end up missing the consensus estimate.
Because of this, it’s really important to check a company’s Earnings ESP ahead of its quarterly release to increase the odds of success.
Fanta Coke?
So, for the first time in over a decade, Coca-Cola is unveiling a new flavor. Say hello to Orange Vanilla Coke and Orange Vanilla Coke Zero Sugar.
The pair of new products go on sale Feb. 25 across the country and will be available in 12-ounce cans and 20-ounce plastic bottles, the Atlanta-based soda giant said Friday. The new flavor also will be sold at Wendy’s restaurants in fountain dispensers through the end of the NCAA March Madness basketball tournament, at which point it’ll be available in all Coca-Cola soda dispensers.
“We wanted to bring back positive memories of carefree summer days. That’s why we leaned into the orange-vanilla flavor combination – which is reminiscent of the creamy orange popsicles we grew up loving, but in a classically Coke way,” said Coca-Cola brand director Kate Carpenter.