Earnings Preview: The Coca-Cola Company

Jul.11.12 | About: The Coca-Cola (KO)

The Coca-Cola Company (KO), a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages. Its sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as carbonated energy drinks, and carbonated waters and flavored waters.

It is scheduled to report its Q2 2012 results on July 17, 2012, before the market opens. In this article I will recap the historical results of the company, latest EPS estimates vs. surprises, latest developments and closest competitors' development.

Technical Overview

The stock has a market capitalization of $175.92B and is currently trading at $77.98 with a 52 week range of $63.34 - $79.36. The stock performance year to date: 13.03%. It is currently trading above 20, 50 and 200 SMA.

Key Metrics

  • Trailing P/E: 20.73
  • Forward P/E: 17.52
  • Price/Sales: 3.73
  • Price/Book: 5.36
  • PEG Ratio: 2.63
  • Total Debt: 31.12B
  • Annual dividend yield: 2.50%
  • Return on Equity: 26.70%
  • Return on Assets: 8.64%

Recent EPS Actuals vs. Estimates

The company has met or beaten analysts' estimates in the last four quarters. In the last quarter it reported $0.89 EPS, beating analyst estimates of $0.87.

The consensus EPS estimate is $1.19 based on 14 analysts' estimates, up from $1.17 a year ago. Revenue estimates are $13.02B, up from $12.74B a year ago. The median target price by analysts for the stock is $81.00.

Average recommendation: Overweight

Source: Marketwatch

Analyst Upgrades and Downgrades

  • On April 18, 2012, UBS reiterated Neutral rating for the company.
  • On April 18, 2012, Argus reiterated Buy rating for the company.
  • On April 2, 2012, the company was downgraded from Buy to Hold at Stifel Nicolaus.
  • On January 11, 2012, the company was downgraded from Buy to Neutral at UBS.

Latest Developments

  • On June 21, 2012, Reuters reported that The Coca-Cola Co has signed a deal with Fair Oaks Farms Brands to distribute the Core Power range of high-protein energy drinks in the United States, as the soft drink giant moves into the dairy products market.
  • On June 5, 2012, The Coca-Cola Company, Ford Motor Company, H.J. Heinz Company, NIKE, Inc. and Procter & Gamble announced the formation of the Plant PET Technology Collaborative (NASDAQ:PTC), a strategic working group focused on accelerating the development and use of 100% plant-based PET materials and fiber in their products.
  • On May 18, 2012, Reuters reported that U.S. appeals court on Thursday revived part of a lawsuit against The Coca-Cola Company in which POM Wonderful LLC accused Coke of falsely advertising its Pomegranate Blueberry juice product.
  • On May 1, 2012, Reuters reported that The Coca-Cola Company took the unusual step of shooting down a report on Monday that said it was in talks to buy energy drink maker Monster Beverage Corporation, valued at more than $11 billion.
  • On April 18, 2012, The Coca-Cola Company and Spotify announced a multifaceted strategic partnership that combines the global scale and reach of Coca-Cola with Spotify's music technology platform to give consumers around the world unprecedented access to the music they love.
  • On April 18, 2012, SeeNews - The Corporate Wire reported that the shares of Apple Inc, Visa Inc, Intel Corp, The Coca-Cola Company and Bank of America Corp can be traded on the Bucharest bourse as of April 18, 2012.
  • On April 11, 2012, Bucharest Stock Exchange announced that Apple Inc, Bank of America Corp, Intel Corp, The Coca-Cola Company and Visa Inc will start trading on the alternative trading system of the Bucharest Stock Exchange on April 18, 2012.
  • On April 2, 2012, Dunkin' Brands Group Inc, the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), the National DCP, the exclusive supply chain partner for Dunkin' Brands, and The Coca-Cola Company announced a multi-year product and marketing agreement.
  • On February 21, 2012, Coca-Cola FEMSA SAB de CV. announced that it has entered into a 12 month exclusivity agreement with The Coca-Cola Company to evaluate the potential acquisition of a controlling ownership stake in the bottling operations owned by The Coca-Cola Company in the Philippines.
  • On February 16, 2012, The Coca-Cola Company announced that the Board of Directors has approved the Company's annual dividend increase, raising the quarterly dividend 8.5% from $0.47 to $0.51 per common share.


The Coca-Cola Company operates in Beverages - Soft Drinks industry. The company could be compared to direct competitor Pepsico, Inc. (PEP) and a few others - Cott Corporation (COT), Dr Pepper Snapple Group, Inc. (DPS), National Beverage Corp. (FIZZ). Below is the table comparison of the most important ratios between these companies and the industry.

Below is the chart comparison with the stock price changes as a percentage for the selected companies and S&P 500 index for the last one year period.

KO ChartClick to enlarge

KO data by YCharts

Competitors' Latest Development

  • On July 9, 2012, PepsiCo Inc. and Theo Muller Group (Muller), the privately held dairy business in Germany, announced that their U.S. joint venture, Muller Quaker Dairy, will enter the growing U.S. dairy market in mid-July with yogurt products that have never before been available to U.S. consumers.
  • On May 2, 2012, PepsiCo Inc. announced that it has declared a 4% increase in the Company's annual dividend, from the current annual rate of $2.06 to $2.15 per share on PepsiCo common stock.
  • On April 30, 2012, DineEquity Inc, the parent company of Applebee's Neighborhood Grill & Bar and IHOP Restaurants announced it has signed a 10-year contract with PepsiCo, Inc. to be the exclusive non-alcoholic beverage provider in the majority of soft-drink categories for its more than 1,800 Applebee's and 1,500 IHOP restaurants throughout the U.S. As part of this agreement, Applebee's and IHOP patrons will now be able to enjoy a variety of PepsiCo beverages with their meals, including Pepsi, Diet Pepsi, Mountain Dew, Sierra Mist, Mug Root Beer and Tropicana lemonade.
  • On April 26, 2012, PepsiCo Inc. announced that consistent with its previous guidance for fiscal 2012, the Company expects a decline in core constant currency EPS of approximately 5% from its fiscal 2011 core EPS of $4.40. Based on the current forex market consensus, foreign exchange translation would have an unfavorable impact of approximately 2% points on the Company's full year core EPS performance in fiscal 2012.
  • On April 25, 2012, Dr Pepper Snapple Group Inc announced that it continues to expect fiscal 2012 reported net sales growth near the low end of its long-term 3% to 5% range and Core EPS to be in the $2.90 to $2.98 range.
  • On April 16, 2012, Family Dollar Stores, Inc. announced it has agreed in terms to a multi-year partnership with PepsiCo, Inc., to sell its beverages in its 7,100 stores across 45 states.
  • On March 31, 2012, Tingyi (Cayman Islands) Holding Corp. and PepsiCo Inc. announced they have completed their transaction to create a strategic beverage alliance in China.
  • On March 12, 2012, PepsiCo Inc. announced that current PepsiCo Americas Foods Chief Executive Officer John Compton has been named to a new position President, PepsiCo.
  • On February 15, 2012, Dr Pepper Snapple Group Inc announced that for fiscal 2012, it expects reported net sales growth near the low end of its long-term 3% to 5% range and diluted earnings per share (NYSEARCA:EPS) to be in the $2.90 to $2.98 range, excluding the impact of commodity mark to market gains and losses.
  • On February 9, 2012, PepsiCo Inc. announced to implement a three-year productivity program that is expected to generate over $500 million in incremental cost savings in 2012, further incremental reductions in the cost base of about $500 million in 2013, and an additional $500 million in 2014.
  • On February 9, 2012, PepsiCo Inc. announced that it targets high-single-digit core constant currency EPS growth for fiscal 2013 and beyond after a transition year in fiscal 2012, in which it expects core constant currency EPS to decrease by 5%. PepsiCo provided its long-term target of mid-single-digit constant currency net revenue growth.
  • On February 8, 2012, Dr Pepper Snapple Group Inc announced that its Board of Directors declared a quarterly dividend of $0.34 per share on the Company's common stock a 6.3% increase in the dividend rate.
  • On February 8, 2012, Reuters reported that Greece's competition watchdog imposed a EUR16.17 million ($21.4 million) fine on PepsiCo Inc. on February 8, 2012 for abusing its dominant market position in the country.
  • On February 6, 2012, Dow Jones reported that PepsiCo Inc. may have withdrawn from the purchase of Brazilian cookie maker Marilan Alimentos because of issues discovered during the due dilligence process, the O Estado de S. Paulo newspaper reported, and in response offered a lower price than expected by the Garla family, which owns Marilan.
  • On January 17, 2012, PepsiCo Inc. and Ocean Spray Cranberries, Inc. announced they have formed a strategic alliance in Latin America. As part of the alliance, PepsiCo will have exclusive rights to manufacture and distribute a portfolio of cranberry- and blueberry-based beverages through its Latin America Beverages division.

Sources: Yahoo Finance, Google Finance, Marketwatch, Finviz, Reuters.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.