The Coca-Cola Company (KO) is set to report first-quarter 2014 results on Apr 15, before the market opens. Last quarter, it delivered in-line results. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Coca-Cola’s top line has been weak for the past 5–6 quarters due to disappointing volume trends of its carbonated soft drinks (CSD). Changing consumer preferences, increasing health consciousness, rising obesity concerns, possible new taxes on sugar-sweetened beverages and growing regulatory pressures are affecting the sales of carbonated beverages of Coca-Cola as well as other soft drink makers like PepsiCo, Inc. (PEP) and Dr Pepper Snapple Group. In fact, CSD category headwinds led to lower-than-expected volume performance at Coca-Cola in 2013. Overall, the company’s revenues and profits in 2013 fell short of management’s expectations.
Though management expects growth to accelerate in 2014, the first quarter is projected to be a tough one for the company. First-quarter revenues and profits are expected to be hurt by continued CSD category headwinds, one less selling day and the shift of Easter timing to the second quarter of 2014. Moreover, foreign exchange is expected to hurt first-quarter operating income by 10%.
Earnings Whisper?
Our proven model does not conclusively show that Coca-Cola is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00%.
Zacks Rank: Coca-Cola carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in the retail sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Big Lots, Inc. (BIG), with an Earnings ESP of +2.27% and a Zacks Rank #3 (Hold).
The Cheesecake Factory Incorporated. (CAKE), with an Earnings ESP of +4.08% and a Zacks Rank #3.
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