Coca-Cola (KO) to Report Q4 Earnings: What's in the Offing?
The Coca-Cola Company KO is likely to register top and bottom-line declines when it reports fourth-quarter 2020 numbers on Feb 10, before the opening bell. The Zacks Consensus Estimate for the company’s fourth-quarter earnings stands at 41 cents, suggesting a decline of 6.8% from the year-ago quarter’s reported figure. Further, the consensus mark has been unchanged in the past 30 days.
For fourth-quarter revenues, the consensus mark is pegged at $8.74 billion, suggesting a 3.6% decline from the prior-year quarter’s reported figure.
In the last reported quarter, the leading soft-drink maker delivered an earnings surprise of 22.2%. Moreover, its bottom line beat the Zacks Consensus Estimate by 11.4%, on average, over the trailing four quarters.
CocaCola Company The Price and EPS Surprise
CocaCola Company The price-eps-surprise | CocaCola Company The Quote
Key Points to Note
Coca-Cola has been witnessing a decrease in total unit case volume on declines in all operating segments, owing to pressures in the away-from-home channels due to the coronavirus outbreak. However, in the last reported quarter, the company noted that unit case volume improved sequentially despite recording an overall decline.
Further, it pointed out that overall volume has continued to improve gradually with a low-single-digit decline experienced in September compared with a 25% decline in April and a mid-single-digit decline through summer. Much of the sequential gain indicates a gradual improvement in the away-from-home channel, which represents nearly half of its business globally. Moreover, sustained growth trends in the at-home channels have been aiding volumes.
Particularly, the company has been witnessing strong demand trends in the grocery and e-commerce channels due to shifts in consumer behavior and its robust system actions to capture these opportunities. These factors are likely to get reflected in the company’s fourth-quarter top line.
The company has been witnessing a splurge in e-commerce, with the growth rate of the channel doubling in many countries mainly due to a shift in consumer preference during the pandemic. In response, it has been accelerating investments to expand presence in this channel compared with the pre-crisis levels.
In North America, it has been investing in e-commerce to support retailers and meal delivery services, shifting toward fit-for-purpose package sizes for online sales, and redeploying consumer and trade promotions toward digital. It has been strengthening consumer connections and further piloting numerous different digital-enabled initiatives through fulfillment methods, be it B2B to home or B2C platforms in many countries, to capture online demand for at-home consumption. These investments and actions are expected to have contributed to the top line in the to-be-reported quarter.
Nevertheless, price/mix continues to be hurt by adverse channel and package mix in key markets due to the coronavirus outbreak. Also, a negative mix in the Global Ventures and Bottling Investments segment has been weighing on price/mix. Additionally, it has been losing global value share in total non-alcoholic ready-to-drink beverages due to a negative channel mix, stemming from softness in the away-from-home channels.
While the company expected to recapture market share due to the reopening of the away-from-home channel, it noted that reopening trends began to be moderate and the away-from-home recovery began to stall in September, owing to increased restrictions in several markets. Also, the company stated that there is an increased chance of regional lockdowns in the fourth quarter due to the arrival of the colder season in the Northern Hemisphere. These factors are expected to have weighed on the company’s top and bottom-line performances in the fourth quarter.
Also, unfavorable currency has been a headwind. In the last reported quarter’s earnings call, the company expected unfavorable currency to affect comparable net revenues by 3% and comparable operating income by 9% in fourth-quarter 2020.
Zacks Model
Our proven model does not conclusively predict an earnings beat for Coca-Cola this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Coca-Cola has a Zacks Rank #3 and an Earnings ESP of -3.12%.
Stocks Likely to Beat on Earnings
Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Bunge Limited BG has an Earnings ESP of +3.09% and it presently sports a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Molson Coors Beverage Company TAP currently has an Earnings ESP of +3.28% and a Zacks Rank #3.
PepsiCo, Inc. PEP has an Earnings ESP of +0.59% and a Zacks Rank #3 at present.
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