What To Expect From Coca-Cola Stock Following Q2 Earnings?

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KO: The Coca-Cola Company logo
KO
The Coca-Cola Company

Coca-Cola (NYSE: KO) is scheduled to report its Q2 2022 results on Tuesday, July 26. We expect Coca-Cola to report revenue and earnings marginally above the consensus estimates. A rise in the number of social events and restaurants operating at full capacity likely aided the company’s sales in Q2. Coca-Cola should benefit from pricing actions, but the Covid-induced lockdowns in China will impact its away-from-home channel sales in that region. Pricing actions likely helped Coca-Cola deliver operating margin expansion in Q2. 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 slightly above the consensus estimates

  • Trefis estimates Coca-Cola’s Q2 2022 revenues to be around $10.6 billion, reflecting a mid-single-digit growth and slightly above the $10.5 billion consensus estimate. 
  • Both at-home and away-from-home channels will likely drive this growth.
  • Looking at Q1 2022, Coca-Cola’s sales of $10.5 billion reflected a 16% y-o-y growth, driven by an 11% rise in concentrate sales and a 7% rise in price/mix.
  • Our dashboard on Coca-Cola Revenues has more details on the company’s segments.
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(2) EPS likely to be marginally above the consensus estimates

  • Coca-Cola’s Q2 2022 adjusted earnings per share (EPS) is expected to be $0.69 per Trefis analysis, marginally above the consensus estimate of $0.67.
  • The company’s adjusted net income of $2.8 billion in Q1 2022 reflected a 17% rise from its $2.4 billion figure in the prior-year quarter, driven by sales growth and over 200 bps operating margins expansion.
  • For the full-year 2022, we expect the adjusted EPS to be higher at $2.50 than the EPS of $2.32 in 2021.

(3) KO stock looks fairly valued

  • We estimate Coca-Cola’s Valuation to be around $67 per share, about 8% above the current market price.
  • This represents a forward P/E multiple of 27x for the company based on our 2022 EPS forecast of $2.50, and it compares with the last three-year average of 25x.
  • 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

While KO stock looks fully valued, it is helpful to see how Coca-Cola’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Coca-Cola vs. Footlocker.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jul 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 KO Return -1% 5% 50%
 S&P 500 Return 3% -19% 73%
 Trefis Multi-Strategy Portfolio 3% -21% 214%

[1] Month-to-date and year-to-date as of 7/19/2022
[2] Cumulative total returns since the end of 2016

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