Coca-Cola
Coca-Cola is a brand we are all familiar with. I believe it also falls into the category of brands that aren’t affected by the economical environment we are in right now as far as the volume of their customers goes. I assume most of Coke’s customers come from either restaurants or customers who have their drinks on a daily or weekly basis as compared to customers who have their drinks every once in a while if they are offered one. Now taking a look at these consumers, I find it highly unlikely that they would reduce their use over higher prices. For example let’s imagine restaurants having a shortage of drinks or sugary drink addicts staying away from their drink over a 9% price increase. That to me seems almost impossible, in fact, I believe even customers who barely use their product won’t have any hesitations on buying one if they wanted to. I also believe that restaurants have been having the same demand on these drinks and there hasn’t been a decrease as Cokes are usually ordered with food and I doubt anybody trying to stay away from a $1 drink when they are already spending much more on their food. Adding more, what I like about this company is the fact that most of their investors are financial firms or long term investors. As I also explained in my CSX report, one good thing about these types of stocks is that you don’t have to expect any unreasonable or big movements unlike other companies. Every movement has a reason behind it and doesn’t usually exceed 3%. At the same time, the pressure on the company is also much higher on being up to date with expectations as they could risk losing a big investment if they don’t provide promising results. One problem that has been on the back of my head is their operating margin costs. It has decreased by around 10% over the last year due to higher operating costs which has also lead to a 28% decline in their EPS. Their net revenue has grown by 12% which satisfies the operating margin decline however, their EPS still doesn’t make me too happy. At the same time, we also have to consider the fact that the expected numbers they are supposed to post has also declined so as long as they beat them, which they have every time, there shouldn’t be a bad reaction as this issue is out of their control.
Analyst’s opinions:
We expect the company to navigate well in Q3 and its stock to trend higher in the near term. Furthermore, our forecast indicates that KO stock has ample room for growth
Trefis estimates Coca-Cola’s Q3 2022 revenues to be around $10.7 billion, reflecting a 7% y-o-y growth and slightly above the $10.5 billion consensus estimate.
PepsiCo recently reported its Q3 results with pricing growth in the high teens while its volume declined in low single-digits. A similar trend with strong pricing growth will likely drive Coca-Cola’s Q3 sales growth.
Coca-Cola’s Q3 2022 adjusted earnings per share is expected to be $0.66 per Trefis analysis, slightly above the consensus estimate of $0.64.
The company’s adjusted net income of $3.1 billion in Q2 2022 reflected a 4% rise from its $2.9 billion figure in the prior-year quarter, driven by sales growth, partly offset by 190 bps net margin contraction.
Report time: Tomorrow before the market opens
Expected movement: +2%
P/E Ratio: 25.98
Market Cap: 247,715,191,550