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Coca-Cola Stock: Assessing Recent Wall Street Activity

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Recent analysts’ activity

Coca-Cola (KO) announced better-than-expected fourth-quarter revenue in February while its earnings were in line with analysts’ forecast. However, the company disappointed investors by cautioning about a slower organic growth rate in 2019. Several analysts lowered their price targets for Coca-Cola on February 15, including the following changes.

  • Macquarie: $47 from $50
  • UBS: $50 from $51
  • Independent Research: $54 from $57
  • Wells Fargo: $50 from $52
  • JP Morgan: $47 from $51
  • Jefferies: $46 from $49.

On February 15, Citigroup lowered its rating for Coca-Cola stock to “neutral” from “buy.” On March 7, Credit Suisse initiated coverage of Coca-Cola stock with a “neutral” rating and a price target of $48. On March 12, HSBC lowered its rating for Coca-Cola stock to “hold” from “buy” and cut its price target to $50 from $64.

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Current ratings

As of March 28, Coca-Cola stock was rated a “hold” by 14 out of 25 analysts covering the soda giant. The stock had a “buy” recommendation from 11 analysts while none of the analysts had a “sell” rating.

Coca-Cola has an extensive beverage portfolio of over 500 brands across sparkling and still beverage categories. The company’s decision to refranchise its bottling operations has helped it in transitioning into a leaner structure. Coca-Cola’s margins have been improving as a result of refranchising lower-margin, capital-intensive bottling operations.

Coca-Cola is now looking for growth in the $500 billion hot beverages market with its $4.9 billion acquisition of Costa coffee company, which completed in January 2019. Coca-Cola also made several bolt-on acquisitions in 2018, including the acquisition of Organic & Raw Company, which makes MOJO Kombucha drinks. Coca-Cola is focusing on expanding its presence in healthier beverage categories to address the shift in consumer choices.

Coca-Cola is a dividend aristocrat—which is to say it has raised dividends for at least 25 straight years. On February 21, Coca-Cola announced a 2.6% hike in its quarterly dividend per share to $0.40, or an annual dividend per share of $1.60. This year marked the 57th consecutive year of dividend hikes at Coca-Cola.

Coca-Cola stock was down 1.6% on a year-to-date basis as of March 28. The average analyst price target for Coca-Cola stock was $50.05 as of March 28, which reflects an upside of about 7%.

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