Coca-Cola's Refreshing Results: Analysts Bullish Despite Near-Term Concerns

Yesterday, Coca-Cola Co KO reported first-quarter FY24 sales growth of 3% year-on-year to $11.3 billion, beating the analyst consensus estimate of $11.01 billion. Adjusted EPS of $0.72 came in above street view.

The following are the comments from various analysts on the company’s first-quarter earnings performance.

Goldman Sachs – Reiterates Neutral, $60.00 price target

Analyst Bonnie Herzog said KO delivered an impressive start to the year with solid organic revenue growth of 11%, handily outpacing expectations.

The strong topline growth, coupled with some benefits from bottler re-franchising and underlying gross margin expansion, helped drive strong gross margin expansion, said the analyst.

Given the strong quarter, KO updated its FY24 guidance and now expects organic revenue growth of +8-9% and f/x-neutral EPS growth of +11-13%, which are quite strong relative to its peers.

Meanwhile, the analyst noted KO’s ability to generate faster dollar EPS growth this year is somewhat limited, which could weigh on the stock in the near term. 

The analyst noted that North American volumes sequentially improved in the last two months of the first quarter as consumer elasticities remained resilient.

The analyst expects KO’s organic topline growth this year to be more balanced between volume and price/mix. However, the analyst noted the company’s organic sales guidance should be doable but could prove challenging given the difficult operating/macro environment.

KO’s stepped-up marketing spend is the right one to help drive healthy, sustainable long-term growth, said the analyst.

BofA Securities – Reiterates Buy, $68.00 price target

Analyst Bryan D. Spillane said KO led off with +11% organic sales to start FY24. Argentina was a benefit to pricing but a drag on unit case volume.

The analyst expects elevated pricing in Latam and EMEA markets through the year, albeit at a far more moderate pace than in first-quarter that should enable an inflection back to concentrate volume growth.

The analyst expects the second quarter YoY gross margin to benefit from bottler re-franchising and expand +120bps, with resilient profitability in North America and Asia-Pacific.

KO’s pricing power, which drove organic sales beats across all other geographic segments as well lends some reassurance that reiterated $2.80-2.82 EPS guide can be achieved, even amid the dynamic operating environment, said the analyst.

Truist Securities – Reiterates Buy, $65.00 price target

Analyst Bill Chappell has raised FY24 and FY25 sales and FY25 EPS estimates following the earnings.

FY24 and FY25 sales estimates are pumped to $46.282 billion and $48.380 billion (from $45.856 billion and $47.924 billion, respectively), and FY25 adj. EPS estimate to $3.03 from $3.00.

Investors can gain exposure Coca-Cola stock via IShares U.S. Consumer Staples ETF IYK and Vanguard Total Stock Market Index Fund ETF VTI.

Price Action: KO shares are trading higher by 1.08% at $62.44 at the last check Wednesday.

Image: Shutterstock/ 360b