Coca Cola Earnings Preview: First Quarter 2009

Coca Cola [[KO]] is scheduled to report first quarter 2009 results before the market opens on Tuesday, April 21. Based on our analysis, we at are expecting KO to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $7.44 billion and EPS of $.67. This would represent a 1% increase in revenues from last year’s $7.38 billion in the same period. The current analyst consensus estimates calls for revenues of $7.43 billion and $.65 EPS.


While the current recessionary environment certainly is challenging, the greatest challenge Coca Cola currently faces is the appreciating U.S. dollar. KO has been able to increase their unit volumes despite the global economic recession. However, since the vast majority of Coca Cola’s come from outside of North America, declining local currencies is negatively impacting their results.


As we begin to emerge from this global recession, we feel that Coca Cola is one of the best positioned Dow components to capitalize as the markets begin to recover. Already, Wall Street is expecting KO to increase their earnings by 9% in 2010.


Share Performance

Coca Cola’s shares are down only 2% since the beginning of the year. In 2008, KO’s shares fell over 26%, but still outperformed the 34% drop in the Dow Jones index.



Shares are now trading at 13x consensus 2010 EPS estimates. This is slightly above the relative valuations of their peer group. Consumer goods stocks such as Coca Cola and Kraft haven’t really participated in the recent market rally and have tended to be much less volatile stocks in the current market environment. KO’s shares are unlikely to increase rapidly in the near term, but remain attractively priced and will likely provide solid gains for investors.


Recommendation: Buy with a $50 price target.


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