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Analysts See Upside Potential in Coca-Cola after Q1 Results

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Price target raised

Coca-Cola (KO) declared better-than-expected first-quarter results on April 23 and impressed investors with 6% organic revenue growth. Several analysts raised their price target for Coca-Cola stock after the company’s first-quarter performance:

  • Credit Suisse: $49 from $48
  • Jefferies: $49 from $46
  • Morgan Stanley: $52 from $48
  • J.P. Morgan: $50 from $47
  • Independent Research: $57 from $54
  • Cowen and Company: $49 from $47
  • UBS: $52 from $50

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Coca-Cola stock rose 1.7% on April 23 in reaction to the company’s strong results. As of April 25, Coca-Cola stock rose 1.0% on a YTD basis. The 12-month price target for Coca-Cola stock was $51.73 as of April 25, which implies that analysts on average see an upside of about 8.0%.

Stocks of nonalcoholic beverage companies PepsiCo (PEP), Keurig Dr Pepper (KDP), and Monster Beverage have risen 14.2%, 7.9%, and 17.6%, respectively, on a YTD basis. Currently, Coca-Cola lags its peers as well as the S&P 500 Index, which is up 16.7% on a YTD basis.

Coca-Cola’s efforts to innovate better beverage choices are helping driving its volumes. Coca-Cola Zero Sugar experienced double-digit volume growth globally for the sixth straight quarter. Overall, the company’s unit case volume grew 2% in the first quarter.

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The company continues to strengthen its non-soda portfolio through innovation and strategic deals. Coca-Cola completed the $4.9 billion acquisition of British coffee company Costa in the first quarter. Coca-Cola is gearing up to launch Costa ready-to-drink products in the second quarter and leverage Costa’s strong network. The company’s Simply juice brand in the US recently launched a line of bottled fruit smoothies. Coca-Cola also aims to capture opportunities in growth categories like kombucha and plant-based beverages.

Guidance intact

Despite the strong performance in the first quarter, Coca-Cola continues to anticipate organic revenue growth of 4% in full-year 2019 and adjusted EPS growth in the -1% to 1% range.

The company expects a $0.02 benefit in the first-quarter EPS resulting from European bottlers stocking up on inventory due to Brexit uncertainty to reverse during the remainder of the year.

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