The Coca-Cola Company
) is set to report fourth quarter and full year 2012 results on
Feb 12 before the market opens. Last quarter it posted a 2%
positive surprise. Let's see how things are shaping up for this
Growth Factors This Past Quarter
Though earnings beat the Zacks Consensus Estimates in the
third quarter, they were below the year-ago levels due to
lukewarm revenues and weak profits. Revenues increased only 1% in
the quarter as benefits from volume growth was largely offset by
currency headwinds and a flat price/mix. Volumes improved in the
quarter due to balanced growth across the developed and emerging
The fourth quarter Zacks Consensus Earnings Estimate stands at
44 cents. Estimates have mostly seen a downward trend ahead of
the fourth quarter earnings release. This may be due to
persistent weakness seen in the overall carbonated soft drinks'
(CSD) volumes in North America since the past few months.
Changing consumer preferences, increasing health consciousness
and growing regulatory pressures are affecting sparkling beverage
sales. This is hurting CSD volumes for Coca-Cola as well as other
beverage companies like
Moreover, management is expecting fourth quarter adjusted
gross margin to be lower than both the second and third quarter
margin of 60.3%, mainly due to the currency and mix shift
headwinds. Foreign exchange is expected to unfavorably impact
operating income in the mid-single-digit range. However, profits
are expected to accelerate in the fourth quarter as operating
expense leverage is expected to be better in the quarter due to 2
additional selling days.
The stock carries a Zacks Rank #4 (Sell). We caution against
stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into
the earnings announcement, especially when the company is seeing
negative estimate revisions momentum.
Other Stocks to Consider
Our model states that a stock needs to have both a positive
Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank of #1, #2 or #3 to beat earnings estimates.
You could, however, consider other consumer staples stocks
Coca-Cola FEMSA S.A.B de C.V
), with Earnings ESP of +7.87% and a Zacks Rank #2 (Buy)
), with an Earnings ESP of +0.97% and a Zacks Rank #2 (Buy)
KELLOGG CO (K): Free Stock Analysis Report
COCA COLA CO (KO): Free Stock Analysis Report
COCA-COLA FEMSA (KOF): Free Stock Analysis
PEPSICO INC (PEP): Free Stock Analysis Report
To read this article on Zacks.com click here.