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Coca-Cola’s 1Q17 Earnings Could Surpass Expectations



Lower earnings

Coca-Cola’s (KO) earnings (excluding one-time items) have fallen for seven consecutive quarters due to weak sales and structural headwinds. Coca-Cola is expected to announce its 1Q17 results on April 25. Analysts expect the company to deliver adjusted EPS of $0.44—a fall of 2.2% YoY (year-over-year).

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Earnings in the previous quarter

In 4Q16, Coca-Cola delivered adjusted EPS of $0.37, which was in line with analysts’ consensus earnings estimate. The company’s 4Q16 adjusted EPS fell 2.6% on a YoY basis due to forex headwinds and structural items—including refranchising the company’s bottling operations.

The company underperformed PepsiCo (PEP) and Dr Pepper Snapple (DPS). They generated growth of 13.2% and 4.0%, respectively, in their 4Q16 adjusted EPS.

For fiscal 2016, Coca-Cola delivered adjusted EPS of $1.91—a fall of 4.5% compared to 2015.

Company’s expectations

Based on guidance issued by Coca-Cola in February 2017, the company expects its 2017 adjusted EPS to fall 1.0%–4.0%—compared to $1.91 for 2016. The company expects currency headwinds and structural items to impact its pre-tax income 3.0%–4.0% and 5.0%–6.0%, respectively, in 2017.

Coca-Cola expects negative currency movements and structural items to have an impact of 3.0%–4.0% and 1.0%–2.0%, respectively, on its 1Q17 pre-tax income.

In the next part, we’ll look at Coca-Cola’s stock price movement.


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