Is Coca-Cola Still Winning the Cola Wars?

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The Coca- Cola Company (KO) Consumer Staples - Beverages | Reports April 20, Before Market Opens

Key Takeaways

• The Estimize consensus is calling for EPS of $0.45 on $10.30 billion in revenue, 1 cent higher than Wall Street on the bottom line and $20 million on the top
• Coca Cola’s aggressive cost cutting and strategic initiatives have led to better than expected earnings despite macroeconomic headwinds and changing consumer preferences
• Coca-Cola still faces muted growth in CSD sales as consumers are opting for healthier beverages
• What are you expecting for KO? Get your estimate in here!

Just a few days after rival PepsiCo reports, we get first quarter results from Coca-Cola company. The soda company has been trending downward lately and despite beating last quarter, earnings fell almost 15% on a year over year basis. Shockingly, the market has been optimistic towards Coke and the stock is now up 12% in the past 12 months. This quarter, the Estimize consensus is calling for EPS of $0.45 on $10.30 billion in revenue, 1 cent higher than Wall Street on the bottom line and $20 million on the top. Compared to the same period last year, EPS is predicted to fall 7% while sales are looking to shrink by 4%. On average, Coca-Cola sees relatively flat stock movement leading up and through its earnings report. 

Coca Cola’s aggressive cost cutting and strategic initiatives led to better than expected earnings last quarter, despite macroeconomic headwinds and changing consumer preferences. Strong brand power and a focus on innovation and marketing have been invaluable. Besides soda, Coke is globally recognized as a leading provider of low and no calorie beverages including Dasani water and Minute Maid orange juice to name a few. Meanwhile, Coca-Cola has a strong presence in fast growing emerging markets. The company is optimistic that India has high growth potential and have invested over $2 billion in the region. 

Despite some recent wins, Coke is seeing muted volume trends for carbonated soft drinks (CSD) as consumers are opting for healthier products over sugary beverages. Though the company has increased marketing investment to drive CSD sales, these efforts have yet to result in any meaningful improvements. Moreover, Coke may continue to be hampered by foreign currency headwinds. Fortunately, FX trends are beginning to reverse so this should only impact near term earnings.