Coca-Cola ( KO: NYSE)
By Gabelli & Co. ($40.68, Oct. 22, 2014)
We are reducing our 2015 earnings-per-share estimate by 20 cents
to $2.10 and change our recommendation to Hold from Buy.
Coca-Cola (ticker: KO) shares trade at 19.4 times our new 2015
EPS estimate and provide a current return of 3.0%. We find the
current valuation fair considering the challenging global demand
environment and currency headwinds.
Coca-Cola reported third-quarter results that were below our
expectations and provided a disappointing outlook for the remainder
of 2014 and 2015, calling out a more-challenging macro environment
as the main culprit.
Third-quarter global volumes increased just 1%, a sequential
deceleration from up 3% and up 2% during the second and first
quarters, respectively. Soda volumes were flat and still-beverage
volume grew 2%.
Volume decelerated sequentially in every region with the
exception of Latin America, where volume increased 2% driven by 9%
increase in still-beverage volume and flat soda volume. In North
America soda and still-beverage volumes both declined 1%.
Comparable EPS came in at 53 cents per share, flat versus a
year-ago, and including a negative 6% impact from currency.
Currency is expected to be a 7% and mid-single-digit headwind in
the fourth quarter and 2015, respectively.
Coca-Cola is implementing a series of strategic actions to
reinvigorate growth: 1) Expanding productivity savings from $1
billion by 2016 to $3 billion by 2019; 2) Simplifying its operating
model to speed decision making and enhance local market focus; 3)
Refocusing on Coca-Cola's core business of building strong brands
supplemented by an unmatched global distribution system.
-- Damian Witkowski
The companies mentioned in Hot Research are subjects of research
reports issued recently by investment firms. Their opinions in no
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