Earnings season has begun, and next Tuesday Coca-Cola (NYSE: KO ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever surprises inevitably arise. That way, you'll be less likely to make an uninformed, knee-jerk decision.
Coca-Cola has the No. 1 brand in the world, and it represents the soft-drink industry in the Dow Jones Industrial Average (DJINDICES: ^DJI ) . The stock has been on fire lately as investors look past lingering concerns about consumer demand and whether regulators and consumer groups will challenge its products due to health-related issues. But will that enthusiasm last, or will continued weak sales in the U.S. hurt the company's overall earnings prospects? Let's take an early look at what's been happening with Coca-Cola over the past quarter and what we're likely to see in its quarterly report.
Stats on Coca-Cola
| Analyst EPS Estimate | $0.45 |
| Change From Year-Ago EPS | 2.3% |
| Revenue Estimate | $11.05 billion |
| Change From Year-Ago Revenue | (0.8%) |
| Earnings Beats in Past 4 Quarters | 2 |
Source: Yahoo! Finance.
Will Coca-Cola fizz or fizzle out this quarter?
Analysts have let their earnings estimates for Coke go a bit flat in recent months. They've dropped their earnings calls for the just-finished quarter by a penny per share and reined in their full-year 2013 estimates by $0.03 per share. Yet the stock has barely blinked, rising more than 10% since early January.
Coca-Cola has done an incredible job of taking its iconic U.S. brand and translating it to different populations and cultures around the world. Nearly 80% of Coca-Cola's case volume comes from outside North America, and its products can be found in more than 200 countries. Moreover, Coke's fastest growth has come from abroad: During 2012, volume grew 11% in Eurasia and Africa and 5% in Latin America.
Coke's global expansion hasn't come without some hiccups along the way. Last month, Chinese authorities accused the beverage maker's employees of improperly using GPS equipment to illegally gather classified information. Nevertheless, with Coke, Sprite, and Minute Maid all remaining extremely popular in the emerging-market giant, Coca-Cola's Chinese growth prospects remain strong.
Still, Coke's biggest fight is closer to home, as falling soft-drink consumption has hurt both it and rival PepsiCo (NYSE: PEP ) . Moreover, with a high-profile regulatory attempt in New York City to limit sugary-drink consumption, investors are realizing that Coke could become a target across the nation. Pepsi is fortunate enough to have its global snack business to fall back on, helping to cushion the full blow of any setback in the beverage segment. But Coke's concentration in drinks could hurt its U.S. sales to a greater extent.
In Coca-Cola's quarterly report, watch for the company to address how it plans to handle the controversial energy-drink segment. With energy drink makers facing even more serious health concerns than the overall beverage industry, Coke will need to plot a careful path in order to maximize its potential in the high-growth area of the beverage market.
Coca-Cola's wide moat has helped provide its shareholders with superior gains in the past, but the company faces some new threats to its continued market dominance. The Motley Fool recently compiled a premium research report containing everything you need to know about Coca-Cola. If you own or are considering buying shares in the company, you'll want to click here now and get started!
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