A week ago, The Coca-Cola Company (NYSE:KO) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. The company beat expectations with revenues of US$9.0b arriving 4.5% ahead of forecasts. Statutory earnings per share (EPS) were US$0.52, 4.4% ahead of estimates. Earnings are an important time for investors, as they can track a company’s performance, look at what the analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. We’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the 19 analysts covering Coca-Cola are now predicting revenues of US$36.8b in 2021. If met, this would reflect a solid 10% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 26% to US$2.12. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$36.8b and earnings per share (EPS) of US$2.12 in 2021. So it’s pretty clear that, although the analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
There were no changes to revenue or earnings estimates or the price target of US$59.13, suggesting that the company has met expectations in its recent result. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Coca-Cola, with the most bullish analyst valuing it at US$67.00 and the most bearish at US$53.00 per share. This is a very narrow spread of estimates, implying either that Coca-Cola is an easy company to value, or – more likely – the analysts are relying heavily on some key assumptions.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that Coca-Cola’s rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 14% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 5.0% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 5.6% per year. So it looks like Coca-Cola is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most obvious conclusion is that there’s been no major change in the business’ prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.