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Coca-Cola stock downgraded to Buy at CFRA as earnings growth to slow

EditorRachael Rajan
Published 02/13/2024, 09:48 PM
© Reuters.

On Tuesday, CFRA adjusted its stance on Coca-Cola (NYSE:KO) shares, moving from a "Strong Buy" to a "Buy" rating. The firm also revised its 12-month price target for the beverage giant, dropping it from $68.00 to $66.00. The new price target is based on a forward P/E ratio of 22.0x for the year 2025, which is lower than Coca-Cola's 10-year average forward P/E of 23.2x.

"While we believe the guidance reflects some conservatism, with EPS growth expected to slow and comps becoming more difficult, we lower our opinion one notch to Buy," said CFRA analysts.

The downgrade follows Coca-Cola's recent earnings report where the company posted a Q4 adjusted EPS of $0.49, up from $0.45 in the same quarter last year, meeting the consensus estimate. Revenue for the quarter increased by 7% to $10.85 billion, which was $200 million ahead of consensus. This revenue boost was attributed to a strong performance in price/mix and concentrate sales, although partially offset by currency and other net changes.

Coca-Cola's growth was particularly notable in Latin America, where segment net revenue surged by 16%. The company also reported an expansion in gross margin by 190 basis points, reaching 57.3%.

For 2024, Coca-Cola has set adjusted EPS growth guidance at 4%-5%, which suggests an EPS range of $2.80-$2.82. This guidance is consistent with the current consensus of $2.81. CFRA has maintained its adjusted EPS estimates of $2.85 for 2024 and $3.00 for 2025, indicating some level of confidence in the company's performance despite the rating change.

InvestingPro Insights

The recent analysis by CFRA on Coca-Cola's stock performance and future outlook aligns with some of the metrics and insights available on InvestingPro. A key highlight is Coca-Cola's perfect Piotroski Score of 9, which indicates a very strong financial position of the company. This score is a testament to Coca-Cola's robust operational efficiency and profitability, which can reassure investors about the company's financial health.

Another significant point from InvestingPro Tips is Coca-Cola's consistent history of raising dividends, with an impressive track record of 53 consecutive years. This showcases the company's commitment to returning value to shareholders and its confidence in maintaining a strong cash flow to support these payments. Additionally, 8 analysts have revised their earnings upwards for the upcoming period, suggesting a positive sentiment regarding Coca-Cola's future performance.

From the InvestingPro Data, Coca-Cola's market capitalization stands at a hefty $258.11 billion, reflecting its sizeable presence in the market. The company's P/E ratio is 23.9, which is slightly above the forward P/E ratio of 22.0x for the year 2025 mentioned by CFRA. However, the adjusted P/E ratio for the last twelve months as of Q3 2023 is 22.02, closer to CFRA's basis for the new price target. Moreover, the company has demonstrated a gross profit margin of 59.14% over the last twelve months as of Q3 2023, underlining its impressive profitability.

For readers interested in more detailed analysis and additional metrics, InvestingPro offers a comprehensive range of insights. With the use of coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 12 more InvestingPro Tips available for Coca-Cola, providing a deeper dive into the company's financials and market performance.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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