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Will Beverage Stocks KO & AKO.B Add Fizz to Q1 Earnings?

Zacks Equity Research
Updated

As we get midway into the first quarter of 2017 earnings season, the outlook for almost 800 companies, including 191 S&P 500 members, is quite compelling. The quarter so far has impressed investors with accelerating growth (compared with the preceding quarter) which is on its way to reach the highest level in almost three years.

Per our latest Earnings Preview, earnings for the total S&P 500 companies are expected to grow 9.1% from the year-ago period, while revenues will increase 6%. In the fourth quarter, earnings of S&P 500 companies increased 7.4%, while revenues rose 4.8%.

The performance of the index is not restricted to a single sector. Of the 16 Zacks sectors, four are expected to witness an earnings decline with Retail/Wholesale, Autos and Transportation likely to be major drag.

Although the Consumer Staples stocks have performed better than expected so far, the year-over-year results have not been that encouraging. As of Apr 21, 15.6% of the S&P 500 companies in this sector have reported results. Of these, 80% companies posted an earnings beat (declining 0.7% year over year), while 20% surpassed revenue estimates (decreasing 6.9% year over year). That said, total earnings in this sector are expected to grow 2.4% and revenues are anticipated to be up 4%.

Let’s take a look at what’s in store for the following beverage stocks within the consumer staples sector, which are likely to release first-quarter 2017 results around Apr 25. Other important stocks in the sector, Dr Pepper Snapple Group, Inc. DPS and PepsiCo, Inc. PEP, are set to report their quarterly numbers on Apr 26.

The Coca-Cola Company KO, the world's largest beverage company and leading producer and marketer of soft drinks, is scheduled to report results before the opening bell.

Last quarter, the company posted a positive earnings surprise of 2.78%. The cola giant surpassed earnings estimates in each of the past four quarters with an average surprise of 2.65%.

Our proven model shows that Coca-Cola is likely to beat earnings because it has the perfect combination of an Earnings ESP of +2.27% (Most Accurate estimate stands at 45 cents and Zacks Consensus Estimate at 44 cents) and a Zacks Rank #2 (Buy). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

Although the company’s top line remained muted over the past several quarters, primarily due to weak volumes especially in the sparkling beverage category, its aggressive cost-cutting and strategic initiatives led to better-than-expected results in the fourth quarter amid heightened global volatility and macro headwinds. Similar trends are expected to be witnessed in the to-be-reported quarter as well.

For the first quarter, the Zacks Consensus Estimate for earnings is pegged at 44 cents, reflecting a 2.7% year-over-year decrease. Meanwhile, our estimate for revenues is pegged at $8.97 billion, implying a 12.7% decrease.

Coca-Cola Company (The) Price and EPS Surprise

 

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

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Coca-Cola’s shares increased 3.7% since the beginning of the year compared with the Zacks categorized Beverages-Soft Drinks industry’s gain of 7.6%.

Embotelladora Andina S.A. AKO.B produces and distributes Coca-Cola products in Chile, Brazil and Argentina.

Last quarter, the company posted a positive earnings surprise of 9.38%. Currently, the company has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate is pegged at 39 cents.

Embotelladora’s Zacks Rank #1 (Strong Buy) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about a positive earnings surprise.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Embotelladora Andina S.A. Price and EPS Surprise

 

Embotelladora Andina S.A. Price and EPS Surprise | Embotelladora Andina S.A. Quote

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Coca-Cola Company (The) (KO): Free Stock Analysis Report
 
Dr Pepper Snapple Group, Inc (DPS): Free Stock Analysis Report
 
Pepsico, Inc. (PEP): Free Stock Analysis Report
 
Embotelladora Andina S.A. (AKO.B): Free Stock Analysis Report
 
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Zacks Investment Research