PreMarket Prep Stock Of The Day: The Coca-Cola Earnings Trade

More often than not, an issue will have its most volatile price action on the same day that it reports earnings. That is certainly the case with Coca-Cola Co. KO, which is Monday's PreMarket Prep Stock of the Day.

Unusual Move: Being a slow-moving, low beta issue, Coca Cola can take months or even years to make a $10 move in either direction. Yet it bottomed on March 10 at $57.50 and on Thursday posted a new all-time high ($67) and all-time closing high ($66.21). It backed off with the broad market on Friday to end the week at $65.25.

Coca-Cola's Q1 Report: Before the open Monday Coca-Cola reported quarterly earnings of 64 cents per share, which beat the analyst consensus estimate of 58 cents by 10.34%. The company reported quarterly sales of $10.5 billion, which beat the analyst consensus estimate of $9.83 billion by 6.82%.

Coca-Cola forecast FY22 comparable EPS growth of 5%-6%.

The company estimated the direct impacts from the suspension of its business in Russia to total 1%-2% of net revenues and operating income.

PreMarket Prep's Take On Coca-Cola: When the issue was being covered on the show Monday, it was trading at the $66.50 level, which was in the green by over $1. Co-host Dennis Dick was skeptical of the rally.

“It certainly is a recession-proof stock, but I am not buying anything on rallies,” he said. “Money managers may look at this rally and say it's time to raise some cash and sell some Coke.”

The author of this article called $67 the “ultimate juicy level” at which to sell Coca-Cola shares, but was unsure the stock would reach it.

In addition, the all-time closing high of $66.21 was a key level, as that was the best mark for investors and institutions that have the issue in their portfolio.

KO Price Action: After a much higher open ($67 vs.$65.25), Coca-Cola went another 20 cents and sharply reversed course, As of 12:45 PM EST, the ensuing decline took the issue in the red before bottoming at $64.78. It has bounced off that low and is now trading actively in the $65 handle. 

The full discussion on the issue from Monday’s show can be found here: