U.S. markets open in 1 hour 42 minutes

Coronavirus Outbreak to Hurt Coca-Cola Q1 Earnings & Revenues

Zacks Equity Research

The coronavirus outbreak in China has not only disrupted trade in the country but has also impacted global trade of companies, either with manufacturing units or stores there. The Coca-Cola Company KO has updated investors on how the COVID-19 outbreak will likely impact its first-quarter 2020 results, following several companies revealing the estimated impacts of the current situation in China on their results.

Given the outbreak in the country, the company has prioritized the health and safety of its associates, and is taking the possible precautionary measures to prevent further spread of the virus.

In first-quarter 2020, it expects that the COVID-19 will hurt organic revenues by 1-2 percentage points, unit case volume by 2-3 percentage points and earnings per share by 1-2 cents. However, the company reiterated its previous guidance for 2020. It also stated that any changes in the guidance, based on the current situation, will be announced on the next earnings call in April.

On its last earnings call, Coca-Cola had anticipated organic revenue growth of 5% in 2020. The company predicted comparable currency-neutral operating income growth of 8%. It expected comparable earnings per share of $2.25, suggesting a 7% increase from $2.11 reported in 2019.

Nevertheless, the company continues to remain optimistic about the long-term growth trends for its business in China, which is its third-largest market in the world based on unit case volume. Notably, China contributes nearly 10% to its global volume. It expects to continue investing in this important world market to deliver long-term growth.

Some of the companies that recently closed stores and expect potential impacts of coronavirus outbreak on their performance are V.F. Corp VFC, NIKE NKE and Ralph Lauren RL. NIKE temporarily closed nearly half of company-owned stores in Greater China, while V.F. Corp closed about 60% of its owned and partnered stores in China. Moreover, Ralph Lauren temporarily closed nearly two-thirds of its stores in mainland China. For fourth-quarter fiscal 2020, Ralph Lauren expects its Asia segment’s results to reflect impacts of nearly $55-$70 million on net sales and $35-$45 million on operating income.

Price Performance

The update on the impacts of coronavirus on Coca-Cola’s first-quarter results had a little impact on its stock performance on Feb 21, with shares inching up 0.7%. Analysts see no major impacts on its performance due to the situation in China, given the company’s solid global position and constant innovation efforts.

In the past three months, the Zacks Rank #2 (Buy) stock has gained 13% compared with the industry’s growth of 9.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.

 


Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.7% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
NIKE, Inc. (NKE) : Free Stock Analysis Report
 
V.F. Corporation (VFC) : Free Stock Analysis Report
 
Ralph Lauren Corporation (RL) : Free Stock Analysis Report
 
Coca-Cola Company (The) (KO) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.