Coca-Cola products
Justin Sullivan/Getty Images
stock is falling on Monday, one of a number of reopening plays that’s seeing pressure as the Delta variant of Covid-19 has investors concerned about the continuing global recovery. It’s also trailed the broader market year to date, although at least one analyst thinks that the beverage giant is still a buy, even if it will still feel the pain of the pandemic in its upcoming second quarter.
RBC Capital Markets’
Nik Modi
reiterated an Outperform rating and $60 price target on
(ticker: KO) Monday, ahead of the company’s results, due out on Wednesday.
He expects that the company will deliver earnings per share of 55 cents, in-line with consensus estimates, on organic sales growth of 26%, slightly above the 24% average analyst expectation. Yet he notes that with short interest above historical levels, “hitting numbers (and a lack of negative forward commentary) might be enough to move shares upward.”
He writes that the U.S. recovery appears intact, with volume growth up in the midteens; however, the rest of the world remains more challenging, as regions from Latin America to Southeast Asia are still in the grip of the Covid crisis. In addition, while analysts—including Modi himself—have praised Coke’s reorganization efforts, he thinks it could be several more quarters before the benefits of that move are more evident.
Still, on a brighter note, he highlights recent management commentary that stated “that the developed world is emerging toward a faster recovery.” In addition, while some investors may still be concerned about Coke’s tax woes, which earned it a number of downgrades at the start of the year, Modi writes that he doesn’t expect a resolution on the issue in the near future—with appeals likely even beyond that.
Coke is down 1.5% to $55.58 in recent trading. The shares have edged up 1.5% since the start of the year, although they’re up more than 20% in the past 12 months.
Other analysts have also been getting more bullish on Coke recently. Last week, peer
(PEP) delivered a beat-and-raise quarter.
Write to Teresa Rivas at teresa.rivas@barrons.com
