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Can Coca-Cola (KO) Retain Its Positive Earnings Trend in Q4?

Zacks Equity Research

The Coca-Cola Company KO is scheduled to report fourth-quarter 2019 earnings on Jan 30, before the opening bell. In the last reported quarter, the leading soft-drink maker’s earnings met the Zacks Consensus Estimate. Moreover, its bottom line beat estimates by 1.5%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings stands at 43 cents, suggesting no change from the year-ago quarter’s reported figure. Further, the consensus mark has been unchanged in the past 30 days. For fourth-quarter revenues, the consensus mark is pegged at $8.86 billion, suggesting a 25.5% increase from the prior-year quarter’s reported figure.

Coca-Cola Company (The) Price and EPS Surprise

Key Factors to Note

Coca-Cola’s positive surprise trend is well supported by its effective execution of strategies to evolve as a consumer-centric total beverage company. Its strategy of introducing products alongside a focus on lifting and shifting successful brands globally has been aiding performance. It is also benefiting from the acceleration of sparkling soft drink category through investment and innovation.

The company’s revenues have been gaining from robust performance across all segments as well as growth in volume and price/mix. Revenue growth management initiatives as well as gains from a favorable geographic mix are primarily aiding price/mix. Meanwhile, volume growth has been driven by strength in developing and emerging markets as well as North America particularly due to strong demand for Coca-Cola Zero Sugar.

Additionally, Coca-Cola continually maintains relevance for the Coke brand in the evolving beverage industry through updates to the flagship product and its many variants. To this end, the company continually innovates as well as invests in core categories and brands. It has been witnessing strong performance across key geographies on innovation and sustained investment in the challenger and explorer brands. Gains from these are likely to get reflected in the to-be-reported quarter’s results.

However, the company expects the persistence of adverse currency rates to mar results in the fourth quarter of 2019 and beyond. On the last earnings call, it predicted that unfavorable currency will affect fourth-quarter revenues by 3% and comparable operating income by 7%.

Zacks Model

Our proven model does not predict an earnings beat for Coca-Cola this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Coca-Cola has a Zacks Rank #3 and an Earnings ESP of 0.00%.

Stocks Likely to Beat on Earnings

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Darling Ingredients Inc. DAR presently has an Earnings ESP of +6.38% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Procter & Gamble Company PG has an Earnings ESP of +2.19% and a Zacks Rank #2 at present.

Altria Group, Inc. MO currently has an Earnings ESP of +0.29% and a Zacks Rank #3.

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Click to get this free report Coca-Cola Company (The) (KO) : Free Stock Analysis Report Procter & Gamble Company (The) (PG) : Free Stock Analysis Report Altria Group, Inc. (MO) : Free Stock Analysis Report Darling Ingredients Inc. (DAR) : Free Stock Analysis Report To read this article on click here. Zacks Investment Research