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Wells Fargo Downgrades Coca-Cola to ‘Market Perform’

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Price movement

Coca-Cola (KO) has a market cap of $177.7 billion. It fell 0.36% to close at $41.14 per share on January 19, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.22%, -1.4%, and -0.77%, respectively, on the same day.

KO is trading 0.72% below its 20-day moving average, 0.30% below its 50-day moving average, and 3.9% 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. The YTD price movement of SCHB was 1.1% on January 19.

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

  • PepsiCo (PEP) — $147.2 billion
  • Dr Pepper Snapple Group (DPS) — $16.6 billion

KO’s rating

On January 19, 2017, Wells Fargo downgraded Coca-Cola’s rating to “market perform” from “outperform.”

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Performance in 3Q16

Coca-Cola (KO) reported 3Q16 net operating revenues of $10.6 billion—a YoY (year-over-year) fall of 7.0% from its net operating revenues 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[1. 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 (KO) 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 Sanderson Farms (SAFM).

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