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Will Coca-Cola Deliver Better Results in 2019?

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Company expectations

Coca-Cola (KO) delivered strong results for the first quarter of fiscal 2019. Coca-Cola’s first-quarter revenue rose 5.2% on a year-over-year basis to $8.02 billion, and its adjusted EPS grew 2.1% to $0.48. Coca-Cola didn’t change its guidance, and it continues to expect organic revenue growth of 4% in full-year 2019 and adjusted EPS growth in the -1% to 1% range.

On May 14, Morgan Stanley upgraded its rating for Coca-Cola stock to “overweight” from “equal weight.” Morgan Stanley increased its long-term revenue growth forecast for Coca-Cola to 5% from 4%, based on strong pricing power, favorable strategic changes, and improved trends in emerging markets.

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Analysts’ expectations

Analysts expect Coca-Cola’s revenue to rise 8.9% to $34.7 billion in fiscal 2019. The innovation of healthier choices, aggressive marketing efforts, and higher pricing are expected to drive top-line growth this year. Analysts expect Coca-Cola’s adjusted EPS to rise about 1.0% to $2.10 in 2019. Coca-Cola’s earnings growth is expected to be driven by higher revenue and productivity savings, partially offset by the impact of adverse currency movements.

Coca-Cola is geared up to leverage its acquisition of Costa coffee company to expand in the global hot beverages market. Coca-Cola completed the $4.9 billion acquisition of Costa from Whitbread PLC in January 2019.

Coca-Cola also made several bolt-on acquisitions in 2018 to expand its presence in growth categories like kombucha drinks and functional beverages. The company is also investing in the expansion of the breadth as well as the geographic presence of its established brands. For instance, under its Smartwater brand, Coca-Cola launched Smartwater antioxidant and Smartwater Alkaline in the United States.

Coca-Cola plans to continue to invest in innovating better beverage options for consumers’ growing aversion to sugary, unhealthy soda beverages.

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