How Fizzling Soda Sales May Affect Coca Cola
Estimize | Apr 15, 2014 05:05AM ET
The Coca-Cola Company (NYSE:KO) is set to report FQ1 2014 earnings before the market opens on Tuesday, April 15th. The Coca-Cola Company is an American multinational beverage company best known for its flagship Coke brand. Revenue estimates for Coke are lower this quarter than FQ1 last year as Beverage Digest claims that overall soda consumption fell 3% last year. Despite the broad weakness in soda sales, Coke Zero and the company’s energy drink brands including Monster (MNST) and Coca Cola Relentless have performed well growing over 10% in the past year. Here’s what investors expect from Coca Cola on Tuesday.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Coca Cola to report 44c EPS and $10.662B revenue while the current Estimize.com consensus from 25 Buy Side and Independent contributing analysts is 46c EPS and $10.708B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Coca Cola to beat the Wall Street consensus on both EPS and revenue by a small margin.
By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a moderate differential between the two groups’ EPS expectations and a small differential in revenue.
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The distribution of estimates published by analysts on the Estimize.com platform range from 43c to 50c EPS and from $10.009B to $11.198B in revenues. This quarter we’re seeing a wider distribution of estimates on Coca Cola.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings.
Over the past 4 months the Wall Street EPS consensus fell from 49c to 44c while the Estimize consensus dropped from 49c to 46c. Meanwhile the Wall Street revenue consensus declined from $11.150B to $10.662B while the Estimize forecast sank from $11.175B to $10.708B. Timeliness is correlated with accuracy and downward analyst revenue revisions at the end of the quarter are often a bearish indicator.
The analyst with the highest estimate confidence rating this quarter is Nils1975 who projects 44c EPS and $10.683B in revenue. Nils1975 is ranked 12th overall among over 4,000 contributing analysts. Over the past 2 years Nils1975 has been more accurate than Wall Street in forecasting EPS and revenue 62% and 60% of the time respectively throughout 494 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case Nils1975 is expecting Coca Cola to perform in-line with Wall Street expectations and miss the Estimize consensus.
Although carbonated beverage sales have fallen in the past year, Coca Cola still has a few brands performing very well right now. Energy drinks and Coke Zero have been growing rapidly and the company is getting ready to launch branded do it yourself at home carbonated sodas through its stake in SodaStream sometime by 2015. Just like how soda sales fell 3% last year according to Beverage Digest, the Estimize community expects Coca Cola to report a 3% year over year revenue decline this quarter while still beating the expectations from Wall Street by a small margin.
Get access to estimates for Coca Cola published by your Buy Side and Independent analyst peers and follow the rest of earnings season by heading over to Estimize.com. Register for free to create your own estimates and see how you stack up to Wall Street.
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