Coca Cola Earnings Preview: Second Quarter 2009

Coca Cola [[KO]] is scheduled to report their second quarter 2009 results before the market opens on Tuesday, July 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 $8.84 billion and EPS of $.90. This would represent a 2% decline in revenues from last year’s $9.05 billion in the same period. The current analyst consensus estimates calls for revenues of $8.66 billion and EPS of $.89.


Coke has a tremendous track record for delivering quarterly earnings performances that exceed Wall Street’s consensus expectations. Despite the global recessionary environment, we anticipate KO will once again deliver solid results this quarter. The company’s ability to maintain price discipline even in the current environment will enable them to better capitalize on an improvement in the global economies.


Coca Cola’s vast global reach and solid growth prospects make it one of the better positioned Dow stocks to capitalize on an economic recovery. Wall Street is anticipating a 9% increase in earnings in 2010 and we believe there is opportunity for Coke to even achieve double-digit growth next year.


Share Performance

Since the beginning of the year, Coca Cola’s shares are up 7%. In 2008, KO’s shares fell 26%, but the stock did outperform the 34% decline in the Dow Jones industrial average.



Shares are now trading at 15x consensus 2010 EPS estimates. This is above the relative valuations of their peer group. Despite its safe 3.4% dividend and solid growth prospects, Coca Cola appears to be fairly valued at its current levels.


Recommendation: Hold with a $45 price target.


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