Impact of 1Q18 results
Coca-Cola’s (KO) 12-month forward PE (price-to-earnings) ratio declined 3.4% to 20.2x on April 24, the day the company announced its 1Q18 results. The company’s 1Q18 earnings and revenues exceeded analysts’ estimates. As we mentioned in Part 1 of this series, Coca-Cola stock fell 2.1% on April 24.
On April 24, PepsiCo (PEP), Dr Pepper Snapple (DPS), and Monster Beverage (MNST) were trading at 12-month forward PE ratios of 17.8x, 22.7x, and 31.4x, respectively. The S&P 500 Index was trading at a 12-month forward valuation multiple of 16.9x.
The 12-month forward PE ratio is based on a company’s current price and an estimate of its EPS (earnings per share) over the next four quarters. This valuation multiple differs among peers in the same sector due to several factors, including earnings growth expectations.
Analysts expect Coca-Cola’s (KO) revenues to decline 10.3% to $31.8 billion in 2018. This decline is expected to be the result of the company’s refranchising initiatives. The company’s 2018 EPS, excluding one-time items, is expected to come in at $2.10, which reflects growth of ~10.0% compared to $1.91 in 2017. The company’s adjusted EPS growth is expected to be driven by its productivity efforts.
As we stated earlier in this series, Coca-Cola expects its 2018 organic revenues to grow ~4.0% in 2018. The company expects its adjusted EPS from continuing operations to rise ~8.0%–10.0% in 2018.
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