Coca-Cola's Outlook Has Analysts Perking Up

Sell-side analysts say The Coca Cola Co. KO has a refreshing new outlook that looks beyond its old standby product; strong sales; and a willingness to branch out, all of which look positive for the iconic global drink brand.

Coca-Cola beat Street earnings estimates by two pennies Tuesday, reporting earnings per share of 48 cents on revenue of $8.02 billion, also above Street expectations. The company adjusted its full-year organic sales growth guidance above 5 percent.

Coke's quarterly report seemed to signal consumers are looking to the company for healthier alternatives, buying more sugar-free Coke Zero and water. The company also is highlighting other new products, including its recently launched Coke Energy and Coke Coffee, the latter of which it launched in several Asian markets and plans to roll out in 25 more markets globally this year.

The Analysts

Wells Fargo’s Bonnie Herzog reiterated an Outperform rating on Coke with a $52 price objective.

Bank of America Merrill Lynch analyst Bryan Spillane reiterated a Buy rating with a $55 price target.

UBS analyst Sean King reiterated a Neutral and raised the target price from $50 to $52.

Morgan Stanley’s Dara Mohsenian maintained an Equal-weight rating and raised the target price from $48 to $52.

Wells Fargo

Coca-Cola is adapting well to changes in the competitive soft drink marketplace, Herzog said in a Tuesday note, noting management’s upbeat tone, particularly around its new product pipeline. The tone was also good for the Coke brand, which had 6-percent-plus retail value growth in the quarter, mostly thanks to Coke Zero.

“We expect new innovations such as Coke Coffee and Coke Energy to potentially benefit from what we see as a strong ‘halo effect’ around brand Coke,” the analyst said. “All-in, we’re increasingly upbeat and believe KO’s solid … organic sales growth profile is still an outlier in a growth-strapped staples sector.”

Bank of America 

Coke should continue to get a premium for its makeover into a “total beverage company,” which should yield consistent organic sales growth and attractive margins and returns, Spillane said in a Wednesday note. 

UBS

King sees 4 percent or more organic growth in 2019, and while remaining Neutral, raised estimates for EPS, organic growth and operating margins.

Morgan Stanley

Coke's “valuation is starting to look more compelling, particularly given strong topline results," Mohsenian said in a Wednesday note. 

Price Action

Coke was trading down 0.73 percent to $47.63 at the time of publication Thursday. 

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