To The Moon

$Coca-Cola(KO)$ is scheduled to report the four-quarter results on Tuesday (11 Feb) before the market open.

The market is expected KO to report a solid organic growth in both domestic and international market. And KO is also expected to beat consensus estimate slightly with EPS expected at $0.52 with revenue around $10.51 billion.

But the foreign exchange pressure from the strength of dollar could provide some pressure on KO earnings starting from 2024 into 2025.

Coca-Cola (KO) Last Neutral Earnings Call Give Negative 7.38% Change Since

We saw KO have a negative 7.38% change since its last earnings call on 23 Oct 2024 which was in a neutral sentiment.

We could see that the call reflects a resilient performance with strong organic revenue growth and margin expansion in a challenging environment. Despite volume decline and currency headwinds, the company is confident in its all-weather strategy and long-term growth prospects.

For this upcoming quarter reporting, we could see KO improving their revenue due to the holiday season sales but with the strong dollar, this could have some impact for its earnings coming from the international market. But we will see how much would be impact be.

Coca-Cola (KO) Confident Guidance Could Reduce Currency Headwinds

During The Coca-Cola Company's third quarter 2024 earnings call, the management provided guidance indicating confidence in delivering at the high end of their previous top-line guidance with expected earnings growth of 5% to 6%, despite approximately 9% currency headwinds.

The company achieved 9% organic revenue growth in the quarter, with a 10% increase in price/mix, driven by normal pricing actions and intense inflationary pricing in certain markets. Comparable earnings per share grew by 5% year-over-year, reaching $0.77, despite the currency challenges.

Looking forward, Coca-Cola expects to achieve approximately 10% organic revenue growth and 14% to 15% comparable currency-neutral earnings per share growth for the full year.

For 2025, the company anticipates a low single-digit currency headwind to comparable net revenues and a mid-single-digit currency headwind to comparable earnings per share, with expectations of stable industrial material prices and continued volatility in agricultural commodities. The company remains committed to leveraging productivity levers and investing in brand support while maintaining a strong balance sheet with a net debt leverage of 1.7x EBITDA.

I would be expecting KO to have a pretty decent organic growth for the fourth-quarter as the sales due to festive season could help to push the sale up hence the revenue, considering that the Asia biggest festive holidays (Lunar New Year) is in end of January, and this should drive some good sales for KO.

Organic Revenue Growth Should Continue Stronger In Q4 2024

KO reported a 9% organic revenue growth in Q3 2024, driven by pricing and mix improvements. This should continue to post a stronger growth as the price and mix improvements look to continue working its effect.

The company faced nearly double-digit currency headwinds, impacting earnings and revenue. This might continue with stronger dollar seen from Q4 2024 onwards.

North America Top Line Might Be Affected By Emerging Markets Volume Decline

North America delivered a robust top line growth and won value share, with Trademark Coca-Cola and Fairlife leading in retail sales growth.

Unit case volume declined by 1% in Q3 2024, affected by a slow start in July and challenges in emerging markets. In Q3, China experienced a decline in volume due to a challenging operating environment and strategic portfolio reprioritization, but this should pick up in Q4 with the Asia biggest festive coming in January. Volume decline in Eurasia and Middle East was due to a confluence of headwinds, including geopolitical issues.

Fairlife, a $1 billion brand, continued to drive growth in North America, contributing to mix improvement.

Margin Expansion

Comparable gross margin increased by approximately 70 basis points and comparable operating margin by 100 basis points. Innovative products like Sprite Chill and successful Olympic marketing campaigns contributed to positive engagement and sales.

Favorite amongst institutional investors

We have seen the hedge funds increasing their holdings by 1.3 million shares in the last quarter (Sep to Dec 2024). This is an indication of how KO remain a favorite amongst the institutional investors.

This is despite the currency headwinds faced by KO, as the sales from domestic and international market should be able to overcome this.

Coca-Cola (KO) Price Target

Based on 13 Wall Street analysts offering 12 month price targets for Coca-Cola in the last 3 months. The average price target is $71.46 with a high forecast of $76.00 and a low forecast of $66.00. The average price target represents a 11.94% change from the last price of $63.84.

This could be possible for KO to reach around $65 considering that the sales from its emerging market should be picking up in the fourth-quarter due to the holidays in December.

Technical Analysis - Multi-timeframe (MTF)

The technical is showing that traders and investors are still in adopt and see attitude as KO is trading sideways last two weeks between the 50 and 200 days period, but we are seeing some attempt break though the 50-day period.

This could be due to the effect of the last earnings and also the stronger dollar effect that might hit KO pretty significantly, hence, we need to have KO giving an earnings surprise or a stronger 2025 guidance.

MTF is giving quite a possible neutral signal as investors might not take action until after the earnings call, I would like to take another position after exiting it some time back.

But I would be looking around the $62.80 to $63 price target.

Summary

KO might see its earnings which could show a strong organic growth but the money figure might suffer slightly due to the currency challenge, especially from its emerging market revenue.

I would be looking to see if we could see an earnings surprise and also how KO would perceive the 2025 in its guidance.

Appreciate if you could share your thoughts in the comment section whether you think KO could post an earnings surprise and a better 2025 guidance.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.