What To Expect From Coca-Cola’s Q1?

Coca-Cola (NYSE: KO) is scheduled to report its Q1 2022 results on Monday, April 25. We expect Coca-Cola to likely report revenue and earnings largely in line with the consensus estimates. A rise in the number of social events, restaurants back to full-scale operations, and, more importantly, people venturing out, likely aided beverage sales in Q1. That said, our forecast indicates that KO stock is currently fully valued, as discussed below. Our interactive dashboard analysis of Coca-Cola Earnings Preview has additional details.

(1) Revenues expected to be in line with the consensus estimates

• Trefis estimates Coca-Cola’s Q1 2022 revenues to be around $9.9 billion, aligning with the consensus estimate. 
• Both at-home and away-from-home channels will likely drive the growth.
• However, the rise of Omicron in Q1 may result in slower growth for away-from-home channel sales.
• In its previous earnings conference call, the company’s management stated that it is now better prepared to handle the Covid-19 waves, and the impact from the spread of Omicron is expected to be less disruptive compared to the previous waves.
• Looking at Q4 2021, the company saw its sales grow 10% y-o-y to $9.5 billion. A 10% y-o-y increase in price/mix led to this growth.
• Our dashboard on Coca-Cola Revenues has more details on the company’s top-line trajectory and its comparison with peers.

(2) EPS likely to align with the consensus estimates

• Coca-Cola’s Q1 2022 adjusted earnings per share (EPS) is expected to be $0.59 per Trefis analysis, marginally above the consensus estimate of $0.58.
• The company’s adjusted net income of $1.9 billion in Q4 2021 reflected a 4% fall from its $2.0 billion figure in the prior-year quarter. The sales growth was partly offset by operating margin contraction.
• The company’s operating margins contracted 950 bps y-o-y to 18% in Q4 due to increased marketing expenses. It spent $3.3 billion in SG&A in Q4, reflecting a significant 29% y-o-y increase.
• Our dashboard on Coca-Cola’s Operating Income has more details.
• For the full-year 2022, we expect the adjusted EPS to be higher at $2.45 than the EPS of $2.32 in 2021.

(3) KO stock looks fully valued

• We estimate Coca-Cola’s Valuation to be around $66 per share, in line with the current market price.
• This represents a forward P/E multiple of 27x for the company based on our 2022 EPS forecast of $2.45.
• The P/E multiple above compares with 28x for PEP and 24x for KDP stock, based on our estimates.
• Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year