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Coca-Cola (KO) Q4 Earnings: Disappointment in the Cards?

The Coca-Cola CompanyKO is slated to report fourth-quarter 2016 results on Feb 9, before the opening bell. Last quarter, the company posted a positive earnings surprise of 2.08%.

In fact, the cola giant surpassed earnings estimates in each of the past four quarters, with an average surprise of 2.63%.

Let's see how things are shaping up for this announcement.

Factors to Consider

As stated during the third-quarter earnings call, the company expects Fx headwinds to hurt sales by 1-2% and profit before tax or PBT by 8-9% in the fourth quarter. Acquisitions/divestitures and structural items are likely to hurt revenues by 11% and PBT by 6-7%. Again, unfavorable currency and lower volumes of carbonated soft drinks due to declining demand will continue to hurt the top line.

That said, revenue growth is expected to be stronger in the fourth quarter than the preceding one due to the two additional selling days in the quarter. The strong underlying operating leverage witnessed in the first half of 2016 is expected to moderate in the second half due to difficult comparisons. However, this factor was experienced more in the third quarter and is expected to hurt profits slightly in the to-be-reported quarter.

The company has been struggling to boost sales in the wake of weak demand in certain emerging and developing markets and shift in consumer preference.

Nevertheless, Coca-Cola's aggressive cost-cutting and strategic initiatives led to better-than-expected results in the third quarter amid heightened global volatility and macro headwinds. Increase in the company's marketing investments supported volume growth, especially in North America. We expect to see similar trends in North America in the yet-to-be reported quarter.

Also, pricing gains, cost cuts and productivity savings should continue to support the bottom line.

For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 36 cents a share, reflecting a decrease of 4.7% year over year, while the consensus for revenues is at $9.10 billion, implying 9% year-over-year decline.

Earnings Whispers

Our proven model does not conclusively show that Coca-Cola is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP is 0.00% as the Most Accurate estimate of 36 cents per share is in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Coca-Cola carries a Zacks Rank #4 (Sell). Please note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Coca-Cola Company (The) Price and EPS Surprise

Coca-Cola Company (The) Price and EPS Surprise | Coca-Cola Company (The) Quote

Stocks to Consider

Here are three companies you may want to consider in the broader consumer staples sector as our model shows they have the right combination of elements to post an earnings beat this quarter:

Coty Inc. (COTY , slated to report its quarterly numbers on Feb 9, has an Earnings ESP of +8.33% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Sanderson Farms, Inc.SAFM has an Earnings ESP of +4.48% and a Zacks Rank #3. The company is scheduled to report its quarterly numbers on Feb 23.

Pinnacle Foods, Inc.PF has an Earnings ESP of +1.27% and a Zacks Rank #2. The company is slated to report its quarterly numbers on Feb 23.

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Coca-Cola Company (The) (KO): Free Stock Analysis Report

Sanderson Farms, Inc. (SAFM): Free Stock Analysis Report

Coty Inc. (COTY): Free Stock Analysis Report

Pinnacle Foods, Inc. (PF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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