The Coca Cola Company (KO) is slated to release its fiscal second-quarter 2011 results on Tuesday, July 19.
The Zacks Consensus Estimate for the company is $1.16 per share.
First Quarter Recap
Coca Cola reported first-quarter 2011 earnings per share of 86 cents, missing the Zacks Consensus Estimate by a penny. However, it was higher than the year-ago EPS of 69 cents by 24.63%.
Coca Cola’s net revenues saw robust growth of 40% to $10,545 million from $7,525 million in the year-ago period. The growth was mainly attributable to a 4% increase in concentrate sales, a 2% currency benefit, favorable impact of price-mix ratio and the acquisition of CCE’s North American operations. It was partially offset by the effect of structural changes.
Global unit case volume increased 3% in the quarter.
Geographically, the Eurasia & Africa division witnessed volume growth of 8% year-over-year led by Russia, which surged 24%. This was followed by Turkey at 20%, China (14%), Mexico (11%), India (9%), South Korea (8%) and Germany (4%).
Volumes for the Latin American segment increased 7%, driven by Mexico (14%), Brazil (2%) and the South Latin Region (9%). While North America recorded a 6% volume growth, the Pacific region and Europe witnessed a 5% and 1% volume growth, respectively.
Coca Cola exited the year with $9,075 million in cash and cash equivalents and a long-term debt-to-capitalization of 28.2%. During the first quarter of 2011, Coca Cola generated $458 million of cash from operations and deployed $1,047 million cash for investing activities and $986 million for financing activities.
Agreement of Analysts
Only three out of thirteen analysts moved their estimates in an upward direction over the last 30 days, while two of them lowered estimates for the second quarter of 2011. This implies that analysts are neutral on the outlook and do not foresee any upward catalyst or downward pressure on the result.
For the third quarter, one analyst out of twelve increased his/her estimate, while two of them reduced over the same period. For fiscal 2011, one analyst out of 16 moved his/her estimate up while, one lowered. Two analysts out of 16 increased their estimates for fiscal 2012 and only one moved down over the last 30 days.
Analysts remain optimistic on Coca Cola, encouraged by strong growth outside the U.S. and in emerging markets.
Magnitude of Estimate Revisions
None of the analysts have moved estimates over the last 30-day period for the 2011 quarters or for fiscal 2011 and 2012.
Earnings Surprise
The average earnings surprise over the last four quarters is a positive 2.05%.
Our Recommendation
Coca Cola is actively engaged in hedging activities principally related to commodity exposures associated with the North American business acquired from Coca Cola Enterprises (CCE) in the first quarter of 2011, which also resulted in net unrealized gains of $36 million.
Management reported that the Coca-Cola Refreshments (“CCR”) integration efforts are on schedule. They are expected to generate 2011 net cost synergies of $140 to $150 million. Company-wide productivity initiatives are also on track with a target of $500 million in annualized savings by year-end 2011.
Coca Cola, which competes with Pepsico, Inc. (PEP) currently holds a Zacks #3 Rank. On a long-term basis, we maintain a Neutral rating on the stock, which translates into a short-term Hold rating.
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