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Does Coca-Cola’s strong quarterly earnings leave more room to buy the stock?

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Justin Sullivan

Strong earnings and guidance released earlier this week allowed Coca-Cola (NYSE:KO) to maintain gains posted during the first half of 2022, one of the notable positive standouts in an otherwise gloomy year for stocks. Along with its recent strength, the iconic soft drink maker is considered by many to be well-positioned in an economic environment plagued by fears of an eventual recession.

Given these dynamics, does KO have further to rise from these levels?

Coca-Cola’s Strong Earnings & Guidance

KO delivered a positive earnings report earlier this week that included Street-beating figures for Q2 non-GAAP EPS, revenue, and guidance. The Atlanta-based firm reported Q2 non-GAAP EPS of $0.70 which topped estimates by $0.03. The company also surpassed revenue estimates by $730M, reporting a total for the quarter of $11.3B.

Even more valuable to investors, KO raised its future guidance, despite the challenging macro backdrop. Coca-Cola (KO) now anticipates organic revenue growth of 12% to 13% compared to a prior expectation of 7% to 8% growth.

CEO James Quincey stated: “Our results this quarter reflect the agility of our business, the strength of our streamlined portfolio of brands, and the actions we’ve taken to execute for growth in the face of challenges in the operating and macroeconomic environment.”

With the results, Coke edged higher, preserving gains posted earlier in the year. The stock has climbed about 8% this year, outpacing its closest rival PepsiCo (PEP), which has advanced just 1% on the year. Both names have fared much better than the overall market, with the S&P 500 down 15% for 2022.

Is KO a Buy?

The majority of Wall Street analysts believe KO remains a potential winner. Of the 24 analysts surveyed by Seeking Alpha, 11 have given the stock a Strong Buy rating. Another six label it as a Buy.

Looking at some of the skeptics, six Wall Street experts have tagged Coca-Cola as a Hold. Only one analyst has placed a Sell stance on KO.

KO currently trades near the $63.50 a share mark, off a 52-week high of $67.20 set earlier this year. Analysts have placed an average price target at $69.80 a share, with a high target of $78 and a low target of $58.

Meanwhile, Seeking Alpha’s Quant Ratings take more of a conservative stance. The system of grading quantitative information about the stock classifies KO as a Hold.

The Quant Ratings give KO a D- grade with regards to the organization’s valuation and growth outlook. On a positive note, the quant ratings delivered KO with an A+ regarding profitability and a B+ as it pertains to the stock’s momentum.

See a complete breakdown below:

Seeking Alpha contributor Juxtaposed Ideas placed a Hold rating on Coca-Cola even though it is a solid recession-proof stock. The analyst stated that “KO is trading at a premium, we encourage caution and patience for now.” At the same time, contributor BOOX Research tagged KO with a Buy rating, outlining the potential for more upside, as the stock benefits from its financial resiliency and defensive profile.