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.
(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
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.
|S&P 500 Return||3%||-19%||73%|
|Trefis Multi-Strategy Portfolio||3%||-21%||214%|
 Month-to-date and year-to-date as of 7/19/2022
 Cumulative total returns since the end of 2016