Time To Buy Coca-Cola (KO) Stock Near New All-Time High?
Zacks Investment Research | Nov 12, 2018 05:50AM ET
Coca-Cola (NYSE:KO) shares jumped to a new all-time high Monday as the larger market sunk on the back of declines from Apple (NASDAQ:AAPL) , Microsoft (NASDAQ:MSFT) , and other giants. Coca-Cola is coming off an encouraging third quarter that saw its traditional soda and Diet Coke businesses perform well. But the question is should investors consider buying Coca-Cola stock with its shares up 11% over the last month alone?
Q3 Overview
Coca-Cola’s adjusted third-quarter earnings popped 14% to $0.58 per share, which beat our $0.55 per share estimate. Plus, the beverage giant’s global soda volume grew by 2% from the same quarter a year ago, driven by demand for Diet Coke and Coke Zero Sugar. Investors should note that the firm revamped its Diet Coke packaging and launched new flavors in January 2018.
Meanwhile, organic revenue, which excluded acquisitions, divestitures, and currency fluctuations, popped 6% from the year-ago period. Overall company revenues slipped 9% to $8.25 billion, which was driven by the refranchising of Coca-Cola-owned bottling operations.
Looking ahead, the company reaffirmed its fiscal 2018 guidance of at least 4% organic revenue growth.
Price Movement
As we mentioned at the top, KO stock has surged recently, up roughly 11% in the last month. Shares of Coca-Cola have also climbed 19% over the last six months. With that said, KO stock is up roughly 7% in the last year, which crushed its industry’s 6% decline. Rival PepsiCo (NASDAQ:PEP) stock popped nearly 3% during this same stretch.
We can, however, see from the chart that Coca-Cola stock has lagged the S&P 500 over the five years. Still, shares of KO hit a 52-week and all-time high of $50.24 per share Monday. KO closed regular trading at $49.87 per share.
Valuation
Moving on, KO is currently trading at 22.7X forward 12-month Zacks Consensus EPS estimates, which marks a premium compared to the S&P’s 16.6X and its industry’s 21.3X average. KO stock has traded as high as 24.2X over the last year, with a one-year median of 21X.
With that said, Coke stock is currently trading above its five-year low of 16.7X and its five-year median of 20.8X. Clearly, KO’s valuation picture has been better recently, but it does not appear that stretched at the moment.
Get The News You Want
Outlook & Industry Overview
Coca-Cola Zero Sugar saw double-digit volume growth in Q3. The Atlanta-based company also noted that some of its other non-soda brands like Fuze Tea and smartwater performed well. Going forward, the company could get a boost from its recent investment in sports drink upstart and potential Gatorade rival BodyArmor. Plus, Coca-Cola is set to purchase UK coffee giant Costa for $5.1 billion to further expand its portfolio beyond sugary drinks.
The company’s acquisition, which it expects to close in the first half of 2019, will give the company a solid retail presence outside of the U.S. Costa currently boasts roughly 4,000 cafes, with about 2,500 in the UK. The company also sells coffee in gas stations and grocery stores and is expanding in China.
The purchase could help Coca-Cola take on Starbucks (NASDAQ:SBUX) , Dunkin' (NASDAQ:DNKN) , and others. “Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand,” CEO James Quincey said in a statement. “Costa gives us access to this market with a strong coffee platform.”
The company’s recent moves highlight the need to expand beyond soda and also follows PepsiCo’s SodaStream (NASDAQ:SODA) purchase. This summer, Dr. Pepper Snapple and Keurig Green Mountain merged to form Keurig Dr. Pepper Inc. (NYSE:KDP) .
Q4 Projections & Earnings Trends
Looking ahead, Coke’s Q4 revenues are projected to slip by 6.1% to hit $7.06 billion, based on our current Zacks Consensus Estimate. The company’s full-year revenues are projected to fall by 10.04% to reach $31.86 billion. But we should remember that KO stock isn’t likely to trade based on its overall GAAP top line growth.
Luckily for investors, KO’s adjusted quarterly earnings are projected to pop 7.7% to touch $0.42 per share. Meanwhile, its adjusted full-year earnings are expected jump by 8.9%. We should note that Coca-Cola has experienced mixed earnings estimate revision activity over the last 30 days, with its full-year earnings trending upward and Q4 headed down.
Bottom Line
Coca-Cola is currently a Zacks Rank #3 (Hold) based on its earnings estimate revision activity. But KO rarely misses quarterly earnings estimates. And we can’t forget, especially amid market uncertainty, that Coca-Cola is a dividend payer that has raised its dividend each of the last 55 years. The firm has paid a $0.39 per share dividend in 2018, up from $0.37 in 2017.
Therefore, KO stock might be one to consider even near its new high as it continues to climb upward on the back of strong momentum.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.