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Coca-Cola (KO) to Report Q3 Earnings: What's in Store?

The Coca-Cola CompanyKO is set to report third-quarter 2015 results on Oct 21, before the market opens. Last quarter, the company delivered a positive earnings surprise of 5.00%.

In fact, the cola giant has posted positive earnings surprises in all the past four quarters with an average surprise of 5.83%.

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

Factors to Consider

Coca-Cola reported better-than-expected sales and profits in the first half, despite significant currency headwinds, backed by early signs of improvement from its aggressive cost cutting and productivity initiatives. The resultant savings from the productivity program are being used to fund marketing initiatives and innovation which in turn is re-accelerating top-line growth, margin expansion and returns on capital. Coca-Cola's disciplined advertising investments improved volume growth in the first half of 2015, especially in North America.

However, management believes that much needs to be done to deliver the desired results from these initiatives amid challenging global macro conditions and significant changes at the company.

While the macro environment is improving in the U.S., management expects continued challenges in many key emerging/developing markets like Brazil, Russia and China in the third quarter and beyond.

Nonetheless, we expect the improved volume trends - witnessed in the first half - to continue in the second.

Foreign exchange is expected to hurt third-quarter sales by 7%, operating income by 13% and PBT by 10%.

Structural changes are expected to have a slightly negative impact on third-quarter sales, while it is expected to hurt PBT by 1-2%.

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 as well as the Zacks Consensus Estimate stand at 50 cents.

Zacks Rank: Coca-Cola has a Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Some stocks in the broader food/beverage sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

The J. M. Smucker Company SJM , with an Earnings ESP of +0.66% and a Zacks Rank #2 (Buy)

Lancaster Colony Corporation LANC , with an Earnings ESP of +2.22% and a Zacks Rank #2

Pinnacle Foods Inc. PF , with an Earnings ESP of +2.22% and a Zacks Rank #3 (Hold)

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COCA COLA CO (KO): Free Stock Analysis Report

SMUCKER JM (SJM): Free Stock Analysis Report

PINNACLE FOODS (PF): Get Free Report

LANCASTER COLON (LANC): 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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