Stock movement ahead of results
Coca-Cola (KO) is scheduled to announce its first-quarter results on April 23. Coca-Cola stock was down 0.1% on a YTD basis as of April 17. Coca-Cola stock has declined 5.0% since the company announced its fourth-quarter results in February. Investors were disappointed with the weak organic revenue growth guidance Coca-Cola issued for 2019. Coca-Cola expects its organic revenue growth to slow down to 4% in 2019 compared to 5% in 2018.
Stocks of PepsiCo (PEP), Keurig Dr Pepper (KDP), and Monster Beverage (MNST) have risen 15.0%, 2.3%, and 11.5%, respectively, on a YTD basis. PepsiCo stock rose 3.8% on April 17 in reaction to better-than-expected first-quarter results. Analysts expect Coca-Cola’s revenue to rise 3.4% to $7.88 billion, while adjusted EPS are expected to decline 2.1% to $0.46 in the first quarter.
Analysts’ activity since previous results
After fourth-quarter results, Citigroup downgraded its rating for Coca-Cola stock to “neutral” from “buy” on February 15. On March 7, Credit Suisse started coverage of Coca-Cola stock with a “neutral” rating and assigned a price target of $48. On March 12, HSBC lowered its recommendation for Coca-Cola to “hold” from “buy.” HSBC also lowered its price target to $50 from $64.
As of April 17, Coca-Cola stock carried a “buy” recommendation from 11 analysts and a “hold” rating from 14 analysts. None of the analysts had a “sell” opinion for Coca-Cola stock.
Coca-Cola’s decision to refranchise its low-margin, capital-intensive bottling operations has helped it enhance its margins and create a leaner organizational structure. The company also made several acquisitions last year to enhance its presence in growing categories in the nonalcoholic beverage market beyond the traditional soda category.
In particular, Coca-Cola’s acquisition of British coffee company Costa Limited from Whitbread is expected to help it capture growth prospects in the $500 billion hot beverages market. However, uncertain macro conditions and growing competition in the non-soda space are expected to put pressure on the company’s performance this year.