Coca-Cola's Growth Continues Ahead of Q4 Earnings: Time to Invest?

The Coca-Cola Company KO is slated to report fourth-quarter 2024 earnings on Feb. 11, before the opening bell. The company is expected to register year-over-year bottom-line growth when it reports fourth-quarter numbers.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 51 cents per share, indicating 4.1% growth from the prior-year quarter’s reported figure. The consensus mark for earnings has moved down by a penny in the past 30 days. For quarterly revenues, the consensus mark is pegged at $10.7 billion, implying a 1.5% decline from the year-ago quarter's reported figure.The Atlanta, GA-based company has been reporting steady earnings outcomes, as evident from its positive top and bottom-line surprise trends in the trailing seven quarters. KO delivered a trailing four-quarter earnings surprise of 3.9%, on average. On the last reported quarter’s earnings call, the company registered an earnings surprise of 4.1%. Given its positive record, the question is, can KO maintain the momentum?Earnings Whispers for KOOur proven model conclusively predicts an earnings beat for Coca-Cola this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is exactly the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Coca-Cola has a Zacks Rank #3 and an Earnings ESP of +0.35%. You can see the complete list of today’s Zacks #1 Rank stocks here.Key Trends in Focus Ahead of KO's Q4 Earnings ReleaseCoca-Cola has shown resilience, supported by positive business trends, such as a robust brand portfolio, investments and revenue growth in its segments. This growth has been driven by improved pricing/mix and volume increases.In the fourth quarter, KO’s price/mix is expected to have benefited from growth in pricing and a favorable mix. The pricing gains are expected to have been driven by intense pricing in the markets facing strong inflation and normal pricing actions. The benefits from a favorable mix in several developed markets are likely to have aided Coca-Cola's performance.On the last reported quarter’s earnings call, management was optimistic about the company’s powerful portfolio, supported by its system's unique capabilities. Given this underlying strength and strong year-to-date performance, Coca-Cola is confident about delivering at the high end of its previous organic revenue growth guidance for 2024. KO anticipates organic revenue growth of 10% for 2024 compared with the 9-10% rise mentioned earlier.Comparable currency-neutral EPS is expected to have increased 14-15%, with comparable EPS likely to grow 5-6% year over year for 2024.We anticipate favorable price/mix trends to have fueled the company’s fourth-quarter performance. Our model forecasts a 5.9% year-over-year increase in organic revenues for the fourth quarter, driven by a 6.8% rise in price/mix, offset by a 1% decline in concentrate sales.Coca-Cola’s fourth-quarter results are expected to reflect gains from innovations and increased digital investments. E-commerce has surged, with growth rates doubling in many countries. Coca-Cola has accelerated investments in digital capabilities, enhancing consumer connections and piloting digital initiatives to capture online demand, likely boosting fourth-quarter sales.CocaCola Company (The) Price, Consensus and EPS Surprise  CocaCola Company (The) price-consensus-eps-surprise-chart | CocaCola Company (The) QuoteDespite favorable price/mix in most markets, macroeconomic challenges are expected to have impacted KO’s fourth-quarter performance. Factors such as low consumer confidence in China, geopolitical and economic instability in Eurasia and the Middle East, and high inflation in Argentina are expected to have weighed on Coca-Cola's top-line performance.On the previous earnings call, management noted that inflation was normalizing in developed markets, but developing and emerging markets continue to experience high inflation, leading to elevated pricing and currency headwinds. These inflationary pressures and currency fluctuations are expected to have affected some segments in the fourth quarter.Based on the current rates and impacts of hedged positions, the company anticipates currency headwinds to have influenced 2024 revenues by 5%. Additionally, acquisitions, divestitures and structural changes are expected to have negatively impacted revenues by 4-5% in 2024. Comparable EPS growth is likely to have included headwinds of 9% from currency, and 1-2% from acquisitions, divestitures and structural changes.Our model estimates a 4% impact on fourth-quarter revenues from currency headwinds, and a 4.8% impact of acquisitions, divestitures and structural adjustments.KO’s Price Performance & ValuationCoca-Cola’s shares have exhibited an uptrend, rising as much as 5.3% in the past year. The stock has surpassed the broader industry and the Consumer Staples sector’s 9.5% and 4.3% declines, respectively. However, the KO stock has underperformed the S&P 500 index, which grew 22.5% in the same period.KO Stock’s One-Year Performance Image Source: Zacks Investment Research The Coca-Cola stock outperforms its competitors, including PepsiCo PEP, Keurig Dr Pepper KDP and Monster Beverage MNST, which have declined 14.9%, 0.5% and 18.2%, respectively, in the past year.From the valuation standpoint, KO trades at a forward 12-month P/E multiple of 23.99X, exceeding the industry average of 20.48X and the S&P 500’s average of 18.93X. Coca-Cola’s valuation appears quite pricey.KO undoubtedly commands a high valuation, reflecting its strong market positioning, brand power and long-term growth potential compared with other non-alcoholic beverage companies. However, we believe that its valuation is too stretched at this time. Image Source: Zacks Investment Research Investment ThesisCoca-Cola has been a dominant force in the beverage industry, with more than 40% market share of the non-alcoholic beverage market. KO’s strong market presence, marketing prowess and commitment to innovation have been aiding its performance. The company’s more than 4,700 products and 500 brands, ranging from sodas to energy drinks, highlight its strong market position.The company’s leading market position, diverse product portfolio, and strategic focus on innovation and digital expansion place it well for long-term growth. However, near-term challenges like rising inflationary pressures, macroeconomic disruptions across some markets and adverse currency rates persist.ConclusionNo matter how the KO stock moves after fourth-quarter 2024 earnings results, it remains a strong long-term buy, owing to the company’s solid profitability and growing global presence. Potential investors should assess its current valuation before buying. If you already own the KO stock, hold on to it as Coca-Cola's upcoming earnings report is likely to reinforce the company’s strength.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them 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 CocaCola Company (The) (KO): Free Stock Analysis Report PepsiCo, Inc. (PEP): Free Stock Analysis Report Monster Beverage Corporation (MNST): Free Stock Analysis Report Keurig Dr Pepper, Inc (KDP): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks