The price action in an issue during premarket trading following an earnings announcement can often provide clues to how an issue may trade during the regular session. That was the case with Coca-Cola Co KO, which is Tuesday's PreMarket Prep Stock of the Day.
Street Leans Long Into Coke's Report: The price action a few days ahead of an earnings announcement often reveals short-term sentiment ahead of the report. With respect to Coca-Cola, which has a strong rally with the broad market as a catalyst, had a nice two-day rally ahead of its third-quarter report.
After ending Thursday’s session at $55.08, the issue caught a bid off the open on Friday that persisted into the close. As a result, the issue added 88 cents or 1.6% to close near the high for the session at $55.96.
Monday’s higher open attracted more buyers and the issue gained another $1.61 or 2.9% to close at $57.57. Once again, that was just off the session high of $57.73.
That brings the two-day gain to $2.49 or 4.5%, which is a big move for the thick, usually slow-moving stock.
Coca-Cola's Q3 Earnings: Before the opening Tuesday, the company reported quarterly earnings of 69 cents per share, which beat the analyst consensus estimate of 64 cents by 7.81%.
The company reported quarterly sales of $11.1 billion, which beat the analyst consensus estimate of $10.49 billion by 5.82%.
In addition, the company raised its full-year guidance.
PreMarket Prep's Take: When the issue was being covered on the show, it was trading sharply higher by over $1 at the $59 area, and had already made its premarket high of $59.35.
Co-host Dennis Dick gave the good and bad regarding the issue.
The good news: the issue is “recession-proof, as people as people will want their Coca-Cola in any market environment.”
He added the bad news: “The issue still trades at a very high multiple so one has to be aware of any multiple contractions.”
The author of this article analyzed Coca-Cola's technicals and was skeptical the issue could even trade over $59. The reason: there may be resting orders to sell at $58 and $59 that must be satisfied off the opening print, including price improvement for the lower-priced orders.
On the downside, investors looking to go long on the issue may want to target the top of Monday’s range as a potential support level.
KO Price Action: The stock was able to open just above $59, at $59.04, but immediately found more sellers and peaked at $59.06 before reversing course. The ensuing decline found buyers a few pennies ahead of the top of Monday’s range at $57.75.
The stock ultimately moved back into the upper $58 handle, closing at $59.95, higher by 2.34%.
The discussion on the issue from Tuesday’s show can be found here:
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