CNBC's Jim Cramer says Coca-Cola will fix its problems. Meanwhile, Warren Buffet will never sell his shares. Should you buy?
One little butterfly in China may have cost Coca-Cola hundreds of millions of dollars.
As mathematician Edward Lorenz once explained, it’s theoretically possible for weather to be affected by a butterfly’s flap weeks before. That’s why Coca-Cola perhaps wishes someone in Shanghai was a little more generous with bug spray. Weather, they claim, just messed up their business.
Though its $0.63 per share earnings (excluding items) were in line with expectations, Coca-Cola’s revenues for the past quarter were $12.75 billion, missing analysts’ estimates by $200 million. Management looked to the sky for answers and, like Milli Vanilli, they say blame it on the rain.
“A lot of it was weather,” said Coca-Cola’s CFO Gary Fayard on CNBC’s Squawk Box this morning. “[North America] was cold and wet – wetter than it’s been in decades.” Less dehydrated people mean less need for Coke’s products.
“I want to know if it was raining on their side of the street and sunny on Pepsico’s side of the street,” says Jim Cramer today on CNBC’s Squawk on The Street. “Yesterday, Pepsico [hit an] all-time high. Pepsico, I think now has the proven model – you need more than just drinks.”
Still, Cramer is a long-term optimist. “Coca-Cola is a great American company,” he says. “When you listen to the quarter, you absolutely expect more from the company. But, when you look at it, they do, too. They will readjust. It’s not a sale.”
Cramer isn’t the only person to love Coca-Cola. Its largest shareholder is Warren Buffett, a notorious Cherry Coke fan. Speaking at the company’s annual shareholder meeting back in April, Buffett says, “We own 400 million shares of Coca-Cola stock… We never sold a share. I wouldn’t think of selling a share.”
What do the charts and fundamentals say? We ask Talking Numbers contributors Enis Taner, Global Macro Editor at RiskReversal.com, and Richard Ross, Global Technical Strategist at Auerbach Grayson, to look at Coca-Cola’s fundamentals and technicals to decide if Coke is it.
Watch the video above to see Taner and Ross analyze Coca-Cola.