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Coca-Cola: Sparkling Quarterly Performance, but  Flatter Upside
Stock Analysis & Ideas

Coca-Cola: Sparkling Quarterly Performance, but Flatter Upside

There’s much to like about Coca-Cola (KO), whose business rebounded at an accelerated pace, as reflected through its stellar quarterly performance. The beverage giant recently delivered better-than-expected Q2 results, led by stellar organic sales growth (+37%) and market share gains in both at-home (AH) and away-from-home (AFH) channels.

Besides for its Q2 beat, Coca-Cola revised its full-year organic sales and EPS growth guidance upward. Meanwhile, the company stepped up marketing investments, and foresees continued improvement in volume for the second half of 2021. 

This is all encouraging, according to Jefferies analyst Kevin Grundy, who noted “the recovery in AFH channels, continued resilience in AH channels (notably in DMs + for new occasions), improved market share and commitment to restoring A&M.” 

This translated into a slight increase to Grundy’s EPS forecast for 2022 and 2023. The EPS estimate has moved up by less than 1% for both years. 

Surprisingly, Coca-Cola stock has inched up only 2.2%, even with the solid earnings and improving operating environment. That indicates that the company’s positives are reflected in its price. Besides, the company expects its operating margins to witness compression versus the prior year, as it reinvests into its business. (See Coca-Cola stock charts on TipRanks)

Grundy noted that “at ~25x P/E, KO’s shares are trading close to their historical average vs. staples peers, which is reasonable.”

Furthermore, the analyst sees “less scope for shares to re-rate higher” at current levels. Grundy maintained a Hold rating on Coca-Cola stock. However, he raised the price target to $60 from $59, suggesting a 12-month potential upside of 5.2%.

On TipRanks, Coca-Cola has an analyst rating consensus of Moderate Buy, based on 10 Buys and 6 Holds. The average Coca-Cola price target is $62.19, which implies about 9% upside potential from current levels.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment. 

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