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stock has been lagging this year, hurt by worries about a potentially large tax bill and the continuing effects of the pandemic.
thinks that the beverage giant’s coming earnings could include some good news, although the stock still isn’t a Buy yet.
Analyst Steve Powers reiterated a Hold rating on
(KO) Monday, although he raised his price target to $56 from $54. He expects that the company will “deliver an affirming start to fiscal 2021,” with its first-quarter results, due out on April 19, even as restaurant, movie theaters, and other on-the-go channels remain depressed due to Covid-19.
In addition, he’s upbeat about the company’s plans to restructure its workforce, announced in 2020. “[W]e get the sense that Coke itself has grown increasingly confident in recent restructuring initiatives (and thus increasingly assertive in its quest for productivity gains),” he writes.
Of course, Coke and other consumer companies are facing higher commodity and input costs, which are weighing on companies across the sector. Yet Powers notes that the company’s hedging strategies give it an advantage on that front. In addition, the company’s bottlers are more likely to feel the brunt of higher transport and commodity costs. He also thinks that the company has some pricing power and volume leverage to ease the pressure.
That all sounds like good news, and Powers writes that “Coke continues to manage through the pandemic well, and that alignment with bottlers is strong.” That said, he’s still on the sidelines given concerns about the company’s potential tax liabilities—even if they may not be as bad as some bears think—the continuing delay in a recovery in the company’s away-from-home business, and higher input costs.
Coke is up 0.1% to $53.22 in recent trading. The shares have fallen nearly 3% since the start of the year, and are up 13.4% in the past 12 months.
The stock got a boost from its previous earnings report, delivered in February, even as the company’s outlook was cautious.
Write to Teresa Rivas at teresa.rivas@barrons.com
