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Coca-Cola upgraded by Barclays on turnaround plan focusing on smaller packaging, lower calories

Tae Kim
  • Barclays raises its rating to overweight from equal weight for Coca-Cola shares, saying its new product changes will lead to sales growth next year.
  • "KO's transformation should drive sustainably better growth, which in turn should yield a higher valuation premium," the firm says.

Coca-Cola KO shares will rise due to its new business turnaround plans, according to one Wall Street firm.

Barclays raised its rating to overweight from equal weight for Coca-Cola shares, saying its new product changes will lead to sales growth next year.

"KO is executing a thoughtful business transformation that's among the most comprehensive we've seen," analyst Lauren Lieberman said in a note to clients Thursday. "KO's transformation should drive sustainably better growth, which in turn should yield a higher valuation premium."

Coca-Cola shares are underperforming the market this year. Its shares declined 9.4 percent year to date through Wednesday compared with the S&P 500's 1.8 percent return.

The beverage company's stock is up 1.5 percent Thursday.

Lieberman raised her price target to $48 from $45 for Coca-Cola shares, representing 15.5 percent upside to Wednesday's close.

Citing Coke's plans to use smaller packages for soda drinks and to focus more on lower-calorie beverages, she predicted the company will return to an annual sales growth of about 5 percent in 2019 and 2020 after a more than 10 percent revenue decline this year.

"Should KO deliver the results that we are expecting, we think it deserves a greater valuation premium versus the last decade and recent past, particularly as the rest of the group is under pressure," she said.

— CNBC's Michael Bloom contributed to this story.




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