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Will Coca-Cola Surpass Wall Street’s 4Q16 Earnings Expectations?



Ahead of expectations

Coca-Cola (KO) has exceeded analysts’ earnings expectations for the past eight consecutive quarters. In 3Q16, the company delivered adjusted EPS (earnings per share) of $0.49, surpassing the consensus analysts’ estimate of $0.48. However, in 3Q16, Coca-Cola’s adjusted EPS continued to fall for the sixth straight quarter.

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Factors that affected prior earnings

The 3.9% fall in Coca-Cola’s adjusted 3Q16 EPS was due to adverse currency movements, which impacted its bottom line by 3.0%. Comparing on a sequential and year-over-year basis, the company’s adjusted EPS fell 4.8% and 3.8% in 2Q16 and 3Q15, respectively.

Adjusted EPS excludes the impact of non-recurring items. Coca-Cola’s 3Q16 adjusted EPS excluded charges of $0.25 that were mainly related to refranchising its bottling territories in North America.

In contrast to Coca-Cola, rivals PepsiCo (PEP) and Dr Pepper Snapple Group (DPS) rose 3.7% and 8.3%, respectively, in 3Q16 adjusted EPS.

Lower earnings expected

Analysts expect Coca-Cola to deliver adjusted EPS of $0.37 in 4Q16. That reflects a 2.6% fall compared to $0.38 in 4Q15. Adjusted EPS for PepsiCo and Dr Pepper Snapple Group is expected to rise 9.3% and 5.9%, respectively, in 4Q16.

In October 2016, Coca-Cola reaffirmed its earnings guidance and continued to predict a 4.0%–7.0% fall in its fiscal 2016 adjusted EPS. The company’s adjusted EPS was $2 in fiscal 2015. Currency headwinds and structural changes are expected to drag down Coca-Cola’s earnings in 4Q16 and fiscal 2016.

Next, let’s assess the company’s stock price movement.


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