Will Coca-Cola Post Strong Q4 Earnings?

Coca-Cola (NYSE:KO) will report its earnings for the fourth quarter of fiscal 2019 on Friday before the market opens. The company reported strong third-quarter results in October. Since then, the stock has gained 4.0%. Meanwhile, PepsiCo (NYSE:PEP) has gained 4.5% during the same period. Let’s see if Coca-cola continues its strong performance in the fourth quarter.

Analysts expectations for Coca-Cola’s fourth-quarter earnings

For the fourth quarter, analysts expect a 25.9% YoY (year-over-year) revenue growth to $8.8 billion—sequentially, it’s a decline of 7.3% in the revenue. The company saw a 14.9% YoY increase in its revenue in the third quarter. Notably, the company’s revenue grew due to higher pricing and a favorable geographic mix. Coco-Cola beat analysts’ revenue estimates in all of the quarters in fiscal 2019. The company’s product innovation strategies drove its revenue growth in 2019. Coca-Cola launched a wide variety of innovative beverages last year. Meanwhile, PepsiCo also benefited from higher pricing. PepsiCo saw a 4.2% YoY increase in its revenue to $17.1 billion.

For the fourth quarter, analysts expect an EPS of $0.44—growth of 1.6% YoY. Coca-Cola could also report a gross profit of $5.3 billion. For fiscal 2019, the revenue could increase by 16.4% to $37.0 billion. The earnings could increase by 1.2% to $2.1 per share. 

In comparison, analysts expect PepsiCo to report an EPS of $1.4 for the fourth quarter of fiscal 2019—a decline of 3.5% YoY. The company’s gross profit for the quarter could be around $11.09. PepsiCo will report its fourth-quarter earnings next month. For fiscal 2019, the revenue could rise by 3.3% to $66.8 billion. The earnings could fall by 2.6% to $5.5 per share.

Outlook for 2020

Analysts expect Coca-Cola to report YoY revenue growth for all of the quarters in fiscal 2020. The first and second-quarter revenue could be around $9.0 billion and $10.3 billion. The third and fourth-quarter revenue could be about $9.9 billion and $9.2 billion, respectively. For fiscal 2020, the revenue could rise by 4.2% YoY to $38.6 billion. The company could also show a 7.2% YoY increase in its EPS to $2.2.

For PepsiCo, analysts expect YoY revenue growth in all four quarters in fiscal 2020. For fiscal 2020, the company could report a 4.2% YoY increase to $69.2 billion in its revenue. The company could also report an 8.1% increase in its EPS to $5.9.

In Coca-Cola’s third-quarter earnings, the company updated its fiscal 2019 guidance. The company expects 5% growth in its organic revenues. Coca-Cola also expects a -1% to 1% increase in its EPS for the fiscal year.

Analysts’ recommendations

Currently, analysts have a positive outlook for Coca-Cola stock. Recently, Credit Suisse upgraded the stock to “outperform” from “neutral.” Credit Suisse also increased the target price to $64 from $54. CNBC reported that a Credit Suisse analyst is optimistic about Coco-Cola’s product innovation strategies and leadership. The analyst thinks that both of these factors will benefit the company and stock going forward. On January 20, Guggenheim also increased the target price for Coca-Cola stock to $61 from $59.

In 2019, Coca-Cola stock rose by 17%, while PepsiCo stock rose by 23.7%. In 2020, Coca-Cola has increased by 3% year-to-date, while PepsiCo has risen by 4.2%.

Most analysts seem bullish on Coca-Cola stock. Among the 23 analysts that cover the stock, 11 recommend a “buy,” three recommend a “strong buy,” and nine recommend a “hold.” In comparison, four out of 21 analysts recommend a “buy” for PepsiCo stock, three recommend a “strong buy,” 13 recommend a “hold,” and one recommends a “sell.” 

Currently, analysts have an average target price of $59.48 on Coca-Cola stock. The estimate implies a 4% upside potential over the next 12 months. The stock closed with a loss of 0.82%.

In comparison, the average target price on PepsiCo stock is $140.28. The target price indicates a downside potential of about 2% over the next 12 months. PepsiCo closed with a gain of 0.21% on Tuesday.

Stay with us to learn more about how Coca-Cola performs in its fourth-quarter earnings.