Stock down after its 2Q16 results
The stock price of soda behemoth Coca-Cola (KO) fell by 3.3% to $43.40 on July 27 following the company’s results for 2Q16, which ended on July 1, 2016. As we discussed in Part 1 and Part 2 of this series, Coca-Cola’s adjusted EPS (earnings per share) and revenue for 2Q16 fell on a year-over-year basis. The company also lowered its organic revenue growth guidance for fiscal 2016.
As of July 27, Coca-Cola’s stock price has risen by 2.4% on a YTD (year-to-date) basis. Stock prices of PepsiCo (PEP), Dr Pepper Snapple (DPS), and Monster Beverage (MNST) have risen by 8.8%, 4.3%, and 9.1%, respectively, since the beginning of 2016.
As of July 27, Coca-Cola’s stock has underperformed the S&P 500 Index—it’s up 7.6% on a YTD basis. Coca-Cola accounts for 4.8% of the iShares Global Consumer Staples ETF (KXI). Currently, it’s KXI’s third-largest holding.
As of July 27, 50% or 13 out of 26 analysts covering Coca-Cola’s stock have a “buy” recommendation, 11 analysts have a “hold” recommendation, and two analysts have a “sell” recommendation. Coca-Cola has a leading position in the global nonalcoholic beverages market. The company has an extensive presence in over 200 countries, a strong distribution network, and an impressive portfolio of sparkling and still beverage brands.
However, Coca-Cola’s top line is under pressure due to the persistent weakness in soda volumes caused by a shift in consumer preference to healthier beverages. In fiscal 2015, sparkling or soda beverages accounted for 67% of Coca-Cola’s US unit case volumes and 74% of its non-US unit case volumes. The company is focusing on expanding its still beverage portfolio to reduce it’s exposure to soda beverages.
The 12-month price target for Coca-Cola’s stock is $48.35. This reflects a return potential of 11.4%—compared to the stock price of $43.40 on July 27.
We’ll discuss Coca-Cola’s valuation and outlook in the last part of this series.