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Goldman Sachs Downgraded Coca-Cola to ‘Sell’

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Price movement

Coca-Cola (KO) has a market cap of $178.3 billion. It fell 1.0% and closed at $41.32 per share on January 9, 2017. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -0.34%, 0.07%, and -0.34%, respectively, on the same day. Coca-Cola is trading 0.70% below its 20-day moving average, 0.11% below its 50-day moving average, and 3.8% below its 200-day moving average.

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Related ETF and peers

The Schwab US Broad Market ETF (SCHB) invests 0.75% of its holdings in Coca-Cola. SCHB’s YTD price movement was 1.3% on January 9.

The market caps of Coca-Cola’s competitors are as follows:

  • PepsiCo (PEP) – $148.6 billion
  • Dr Pepper Snapple (DPS) – $16.7 billion

Coca-Cola’s rating

On January 9, 2017, Goldman Sachs downgraded Coca-Cola Company’s rating to “sell” from “neutral.” It also reduced the stock’s price target to $39.0 from $41.0 per share.

Barclays initiated the coverage of Coca-Cola with an “equal-weight” rating. It set the stock’s price target at $42.0 per share.

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Performance in 3Q16

Coca-Cola reported 3Q16 net operating revenue of $10.6 billion—a YoY (year-over-year) fall of 7.0% from its net operating revenue of $11.4 billion in 3Q15. The fall was due to the impact of foreign exchange, acquisitions, divestitures, and structural items.

The company’s gross profit margin and operating margin expanded by 80 basis points and 60 basis points, respectively. The operating margin includes the impact of foreign exchange and structural changes.

Net income, EPS, and cash

Coca-Cola’s net income and EPS (earnings per share) fell to $1.0 million and $0.24, respectively, in 3Q16—compared to $1.4 million and $0.33, respectively, in 3Q15. It reported non-GAAP (generally accepted accounting principles) EPS of $0.49 in fiscal 3Q16—a YoY fall of 3.9%.

Coca-Cola’s total cash, cash equivalents, and short-term investments rose 43.6% YoY. Its inventories fell 3.4% between 4Q15 and 3Q16.

Projections

Coca-Cola made the following projections for fiscal 2016:

  • organic revenue to rise 3.0%
  • comparable currency-neutral income before tax to rise 6.0%–8.0%
  • comparable EPS to fall 4.0%–7.0%

In the next part, we’ll look at Clorox (CLX).

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