Coca-Cola on watch after PepsiCo’s earnings beat – Stock Market News


Christina Parthenidou, XM Investment Research Desk

Coca-Cola Co’s share price is almost 7% above its February troughs when the board expressed that sales growth is set to slow down this year, staging the largest daily sell-off in more than a decade. The soda giant is now ready to announce its first quarterly earnings results for 2019 on Tuesday April 24th before the market open, and traders will pay close attention to any noisy number that sheds light to those fears. Refinitiv analysts recommend holding the stock.

The world’s largest beverage company is expected to report $0.46 in earnings per share (EPS) according to Refinitiv estimates, with the highest bet standing at $0.47 and the lowest at $0.45. Compared to the previous quarter, this would imply a 7% growth, while versus Q1 2018 the measure would contract by 2.0%.

In terms of revenues, the Atlanta-based group, that has been long struggling with re-franchising its bottling operations, is on the back foot since 2015, with revenues declining by around 23% during the aforementioned period. Shifts in exchange rate markets have been also a headwind to financial results as the multinational company attracts most of its sales from outside the United States, with products turning more expensive to foreign buyers when the dollar goes up. Hence factors that are dollar-movers such as the Fed’s rate strategy and the US-Sino trade war are things Coke should consider when budgeting in the year ahead. The diminishing effect from the massive tax cuts offered by the Trump administration to consumers and businesses is expected to bite gains as well, while the focus should mainly be on competitors who are constantly utilizing their marketing strategies to satisfy millennial’s changing tastes.

Consumers nowadays are cutting back on high-calorie food and beverages and key rivals such as Pepsico have already started to spend less on bottlers and more on health snacks and sport drinks to cater a health-conscious audience. Additionally, compared to Coke, Pepsico gives more emphasis to digital advertising and increases its online presence to attract more clients at a smaller cost. A stronger super Bowl helped Pepsico to comfortably beat analysts’ Q1 earnings estimates released last week, and while Coca-cola is expected to impress consumers through its unique sphere-shaped bottles at Disney’s highly anticipated “Star Wars” land, Galaxy’s Edge, during the summer, the firm probably needs to modernize its marketing methods if it wants to keep the lead in the industry.

Total revenues in the three months to March are projected to come at $7,880 billion and slightly higher the $7,058 amount made in Q4 2018 but lower than the Q1 2018 amount of $7,624.  Subtracting expenses, operating costs and taxes, the net income is said to have risen from $1,842 billion to $1,975 in Q1 2019, remaining still below $2,023 registered in Q1 2018. In other key measures, return on equity (ROE) is estimated steady at 34.08%.

Turning to stock markets, traders would be eagerly waiting for the Coke price to rally towards $49 if the results surprise to the upside. Yet the bulls would first need to overcome the 48 area that was quite restrictive in January.

Otherwise, should the report justify the company’s worries over a slowing growth this year, the stock could reverse down to retest the ascending line near the 47 level. Beneath the line, support could be next found between 45.6 and 46.40.