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Coca-Cola’s Earnings Expectations for 3Q17

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Earnings trend

Coca-Cola (KO) has exceeded analysts’ earnings expectations in eight out of the past ten quarters. However, the company’s earnings per share (or EPS), excluding one-time items, have fallen for the past nine consecutive quarters. In 2Q17, Coca-Cola’s earnings fell 1.7% on a year-over-year basis.

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Recap of 2Q17 earnings

Coca-Cola’s adjusted EPS in 2Q17 reached $0.59. The company’s 2Q17 adjusted EPS exceeded the consensus analysts’ estimate of $0.57 but were lower than the adjusted EPS of $0.60 in 2Q16.

The year-over-year decline in the adjusted EPS was a result of lower revenues and unfavorable currency movements. The company’s bottom line in 2Q17 was also impacted by costs related to the refranchising of its bottling operations.

Earnings expectations

Analysts expect Coca-Cola’s adjusted EPS to remain unchanged on a year-over-year basis at $0.49 in 3Q17. The company expects acquisitions, divestitures, and other structural items to present a 9%–10% headwind on its 3Q17 profit before taxes.

Foreign currency fluctuations are expected to have a 2%–3% adverse impact on profits before taxes.

PepsiCo (PEP) delivered adjusted EPS of $1.48 in fiscal 3Q17, reflecting year-over-year growth of 5.7%. This growth was driven by a higher operating margin and a lower effective tax rate.

Coca-Cola revised its earnings guidance for fiscal 2017 in July 2017 due to the lower-than-expected impact of currency headwinds. Coca-Cola expects its adjusted EPS in 2017 to be flat to down 2% compared to $1.91 in 2016.

We’ll look at analysts’ recommendations for Coca-Cola stock in the next part of this series.

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