Here’s what to know beyond why The CocaCola Company (KO) is a trending stock
Coca Cola (KO) has been one of the most searched stocks on Zacks.com lately. So, you might want to consider some of the facts that could shape the stock’s performance in the short term.
Over the past month, shares of the world’s largest beverage maker have returned -2.2%, compared to a -0.1% change in the Zacks S&P 500 composite. soft drink industry Zacks Beverages, which includes Coca-Cola, lost 0.2%. The key question now is: what could be the future direction of the title?
While press releases or rumors about a substantial change in a company’s trading outlook usually “trend” its stock and cause an immediate price change, there are always fundamental facts that ultimately dominate the take. purchase and retention decision.
Revisions to earnings estimates
Rather than focusing on anything else, at Zacks we prioritize assessing change in a company’s earnings projection. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.
We basically look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest trading trends. And if earnings estimates go up for a company, the fair value of its stock goes up. A higher fair value than the current market price stimulates investors’ interest in buying the stock, causing its price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
Coke is expected to post earnings of $0.68 per share for the current quarter, which is no change from the prior year quarter. Over the past 30 days, the Zacks consensus estimate has remained unchanged.
For the current fiscal year, the consensus earnings estimate of $2.47 indicates a change of +6.5% from the prior year. Over the past 30 days, this estimate has remained unchanged.
For the next fiscal year, the consensus earnings estimate of $2.63 indicates a change of +6.6% from what Coke is expected to report a year ago. Over the past month, the estimate has changed by +161.4%.
With an impressive externally audited track record, our proprietary stock rating tool – the Zacks Ranking – is a more conclusive indicator of a stock’s short-term price performance, as it effectively harnesses the power of earnings estimate revisions. . The magnitude of the recent shift in the consensus estimate, along with three other factors related to earnings estimates, resulted in a Zacks #3 (Hold) ranking for Coke.
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Revenue Growth Forecasts
Although earnings growth is arguably the most superior indicator of a company’s financial health, nothing as such happens if a company is unable to increase revenue. After all, it is almost impossible for a company to increase its profits for an extended period of time without increasing its revenue. It is therefore important to know the potential revenue growth of a company.
For Coke, the consensus sales estimate for the current quarter of $10.83 billion indicates a year-over-year change of +6.9%. For the current and future fiscal years, the estimates of $42.11 billion and $44.19 billion indicate variations of +8.9% and +4.9%, respectively.
Latest reported results and history of surprises
Coke reported revenue of $10.49 billion in the last reported quarter, representing a year-over-year change of +16.3%. EPS of $0.64 for the same period versus $0.55 a year ago.
Compared to Zacks’ consensus estimate of $9.91 billion, reported revenue is a surprise +5.84%. Surprise EPS was +10.34%.
The company has exceeded consensus EPS estimates in each of the past four quarters. The company has exceeded consensus earnings estimates every time during this period.
Without considering the valuation of a stock, no investment decision can be effective. Crucial to predicting a stock’s future price performance is whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.
Compare the present value of a company’s valuation multiples, such as its price/earnings (P/E), price/sales (P/S), and price/cash flow (P/CF), to its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, while comparing the company against its peers on these metrics gives a good idea of the reasonableness of its price.
The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to traditional and unconventional valuation metrics to rank stocks from A to F (an A is better than a B; a B is better than a C; and so on), is quite useful in determining whether a stock is overvalued, correctly priced, or temporarily undervalued.
Coke is rated D on this front, indicating that it is trading at a premium to its peers. Click here to see values for some of the rating metrics that led to this rating.
The facts discussed here and plenty of other information on Zacks.com might help determine whether it’s worth paying attention to the market buzz about Coke. However, its No. 3 Zacks ranking suggests it could perform in line with the broader market in the near term.
Benefiting from the Metaverse, the 3rd Internet Boom (Free Report):
Get Zacks’ special report revealing the top profit-making games for the next evolution of the internet. Early investors still have time to approach the “ground floor” of this $30 trillion opportunity. You will discover 5 surprising actions to help you cash in.
Download the report for FREE today >>
Click to get this free report
CocaCola Company The (KO): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.