KO Stock Delivers Solid Q1 Amid Mounting Concerns

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Despite being one of the most recognized brands in the world, The Coca-Cola Co (NYSE:KO) isn’t getting any love this year. Prior to its first quarter 2018 earnings report, KO stock was down 3.4% year-to-date. More problematic was its recent plunge in the markets. At this level, shares haven’t moved much since last summer.

KO Stock Delivers Solid Q1 Amid Mounting Concerns

The biggest headwind is the industry. Although Coca-Cola is the most popular soft-drink in history, according to the company’s website, KO shareholders haven’t much enjoyed this status. Similar to the tobacco industry’s plight, Americans are drinking fewer sugary beverages. That’s a huge problem for Coca-Cola, considering that the brand and product pipeline is primarily associated with sugar.

Adding to sector woes are government-endorsed education initiatives, which promote healthier school cafeteria options. Furthermore, the mainstream media is much more open to discussing soft drinks’ contributions toward obesity and other health problems. These societal changes are a net positive for the country, but not so much if you’re vested in KO stock.

The saving grace for the iconic beverage-maker is that its competitors are also feeling the drought. Chief rival PepsiCo, Inc. (NASDAQ:PEP) is down double digits so far this year. In addition, its pain in the markets only seem to be worsening. You also have Nestle S A/S ADR (OTCMKTS:NSRGY), which finds itself in a similar fate with PepsiCo.

But, as I mentioned in my “smart money stocks” article, KO stock has a wealth of positives. Primarily, almost everyone in the world recognizes the corporate brand. But, more important to the industry concerns, Coca-Cola is more than just a soda company. It has a wide array of beverage options, including several healthy alternatives.

Ultimately, it’s the long-term fundamentals that make Coca-Cola stock a buy.

Solid KO Earnings Report

From its just-released Q1 earnings report, we have nothing to suggest that investors should abandon this perspective. Going into the report, analysts pegged consensus earnings per share forecast at 46 cents, from a range between 42 cents and 47 cents. KO actual EPS came in at the maximum end of this estimate range.

On the revenue front, analysts predicted that Coca-Cola would bring in $7.3 billion. This consensus was based on a range between $6.9 billion to $7.8 billion. Zacks.com held a slightly higher consensus estimate at $7.43 billion. Nevertheless, the company reported actual sales of $7.6 billion, landing in the upper range of estimates.

Against the year-ago quarter, sales slipped noticeably from $9.1 billion due to KO’s bottling operation divestment. However, we saw some encouraging trends in the finer details. For instance, the company’s rebranding efforts, particularly in its Diet Coke brand, paid dividends. New Diet Coke flavors, as well as demand for Coke Zero Sugar, exceeded expectations by approximately $300 million.

All told, unit case volume for carbonated soft drinks increased 4%. For its traditional tea and coffee beverages, Coca-Cola increased sales to 5%. During pre-market trading, KO stock was up 1%.

Focus on the Bigger Picture

I included Coca-Cola stock in my smart money list for a reason. It’s not the sexy, high-growth name that’s here today and gone tomorrow. Instead, this is an iconic company that’s virtually guaranteed to survive all catastrophes, maybe even nuclear war. Therefore, any dip is likely a buying opportunity.

Of course, I’m still sticking with my bullish stance on KO stock. Coca-Cola sells almost two billion Coke bottles every day. The company has 3,500 products under its belt. That equates to over 10,000 company-branded drinks being consumed every second. In addition, it pays out a generous dividend consistently. Quite simply, few organizations like KO exist in the markets.

Moving forward, I expect Coca-Cola stock to break out of its consolidation funk. Analysts leveled serious questions at the beverage-maker, and for good reason. Society just isn’t favorable towards sugary, carbonated drinks.

It’s early, but management proved that its marketing and rebranding campaigns gained traction. A few more positive results should seal the deal. However, astute investors can get into KO stock before this oncoming wave.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2018/04/ko-stock-delivers-solid-q1-amid-mounting-concerns/.

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