On Mar 26, we maintained a Neutral recommendation on cola
The Coca-Cola Company
), following mixed fourth-quarter results announced on Feb 12,
Why the Neutral Recommendation?
Coca-Cola's fourth quarter earnings of 45 cents per share
marginally beat the Zacks Consensus Estimate of 44 cents by a
penny. Moreover, earnings grew 15% from the prior-year
quarter as tepid revenue growth was offset by operating margin
growth, which gained from two extra selling days and
lower-than-expected currency headwinds. Revenues increased only
4% to $11.04 billion as benefits from volume growth was largely
offset by a flat price/mix. The top-line results also marginally
missed the Zacks Consensus Estimate of $11.54 billion.
Following the less than impressive fourth-quarter results,
estimates largely moved downwards over the past 60 days. The
Zacks Consensus Estimate for 2013 went down by almost 1% to $2.14
while that for 2014 declined 0.9% to $2.34 over the last 60 days.
Accordingly, Coca-Cola carries a Zacks Rank #4 (Sell).
Moreover, a weak consumer spending environment and muted
volume growth of its sparkling beverages (largely due to rising
obesity concerns) remain persistent overhangs.
However, we have faith in Coca-Cola's solid long term
fundamentals. Coca-Cola enjoys a global reach, strong brand
power, expanding presence outside the U.S. and boasts of a solid
cash position. Moreover, the integration of
Coca-Cola Enterprises, Inc.'s
) Bottling business (bought in Oct 2010) and the company's
productivity initiatives are expected to result in significant
cost savings, going forward.
Other Stocks to Consider
Some consumer staples stocks that are currently doing well
ConAgra Foods, Inc.
The Procter & Gamble Co.
), both carrying a Zacks Rank #2 (Buy).
CONAGRA FOODS (CAG): Free Stock Analysis
COCA-COLA ENTRP (CCE): Free Stock Analysis
COCA COLA CO (KO): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis
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