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Coca-Cola (KO) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
SARTORIUS AG (SARTF) delivered earnings and revenue surprises of 8.75% and 6.91%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

In the latest trading session, Coca-Cola (KO) closed at $50.78, marking a +1.56% move from the previous day. This change outpaced the S&P 500's 0.82% gain on the day. At the same time, the Dow added 0.82%, and the tech-heavy Nasdaq gained 0.64%.

Coming into today, shares of the world's largest beverage maker had gained 4.17% in the past month. In that same time, the Consumer Staples sector lost 2.05%, while the S&P 500 lost 4.58%.

Investors will be hoping for strength from KO as it approaches its next earnings release. On that day, KO is projected to report earnings of $0.62 per share, which would represent year-over-year growth of 1.64%. Meanwhile, our latest consensus estimate is calling for revenue of $9.58 billion, up 7.26% from the prior-year quarter.

KO's full-year Zacks Consensus Estimates are calling for earnings of $2.10 per share and revenue of $34.97 billion. These results would represent year-over-year changes of +0.96% and +9.79%, respectively.

Investors should also note any recent changes to analyst estimates for KO. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.05% higher. KO is currently a Zacks Rank #2 (Buy).

Looking at its valuation, KO is holding a Forward P/E ratio of 23.84. This represents a premium compared to its industry's average Forward P/E of 23.18.

Meanwhile, KO's PEG ratio is currently 3.36. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. Beverages - Soft drinks stocks are, on average, holding a PEG ratio of 2.19 based on yesterday's closing prices.

The Beverages - Soft drinks industry is part of the Consumer Staples sector. This group has a Zacks Industry Rank of 191, putting it in the bottom 26% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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