Cola giant, The Coca-Cola Company (KO), is all set to unveil its first quarter 2012 results on April 17, 2012, before the start of trading. The Zacks Consensus Estimate for the first quarter is 88 cents (estimated year-over-year improvement of 3.5%) on revenues of $10.8 billion (year-over-year increase of 2.9%).
Fourth Quarter Recap
The Coca-Cola Company delivered better-than-expected operating earnings of 79 cents per share in the fourth-quarter 2011, which exceeded the Zacks Consensus Estimate of 77 cents per share and prior-year earnings of 72 cents per share. The results were also ahead of the long-term targets of Coca-Cola, driven by strong global volume growth and increased value share.
Net revenues increased 5% to $11.0 billion, mainly attributable to solid growth in concentrate sales and positive price/mix. Currency however had a negative 1% impact on net revenue in the quarter. The top line was almost in line with the Zacks Consensus Estimate.
Agreement of Estimate Revisions
Over the past 7 days, only 1 of the 11 analysts covering Coca-Cola has revised the earnings estimate for the first quarter of 2012. The revision has been in the downward direction. Similarly, over the last 30 days one solitary analyst has revised the earnings estimate downward for the first quarter of 2012. Earnings estimates for 2012 have also been cut by just 1 of the 16 analysts covering the stock over the last 30 days with no upward movement. The estimates have remained unchanged over the last 7 days.
Last month, certain regulatory authorities claimed that beverages like those of Coca-Cola and competitor PepsiCo Inc. (PEP) contain a certain level of cancer causing substances. They should thus carry warning labels. This threat of having to include warning labels triggered Coca-Cola to ask their caramel supplier to alter the manufacturing process to reduce the level of the disputed chemical in the caramel. We believe the reduction in estimate may be in response to this negative publicity.
Magnitude of Estimate Revisions
Given the limited estimate revisions, the consensus estimate for the first quarter of fiscal 2012 has remained static over the last 7 as well as 30 days at 88 cents. However, the consensus earnings estimate has gone down by a penny from $4.08 to $4.07 over the last 30 days for fiscal 2012.
Coca-Cola has surpassed earnings estimates in three of the last four quarters. The company has beaten estimates in the last three quarters of 2011, recording a maximum positive surprise of 2.60% in the final quarter of 2011. On average, the earnings surprise was a positive 1.07%.
We currently have a Neutral recommendation on The Coca Cola Company. The stock carries a Zacks #3 Rank (a short-term 'Hold' rating).