Should You Pick Coca-Cola Stock Ahead of Q3 Results?

Coca-Cola (NYSE: KO) will report its Q3 2024 results on Wednesday, October 23. We expect the company’s revenues to come in at $11.65 billion, marginally above the consensus estimate of $11.6 billion. This would mark a year-over-year decline of about 2.5%. Earnings will likely come in at about $0.75 on a per-share and adjusted basis, slightly above the consensus estimate and the prior-year figure of $0.74. See our interactive dashboard analysis on Coca-Cola FY 2024Q3 Earnings Preview for more details on how the company’s revenues and earnings will likely trend for the quarter. So, what are some of the trends that are likely to drive Coca-Cola’s results, and how has the company’s stock performed?

Coca-Cola will likely continue to benefit from higher price/mix, amid inflationary pricing in developing regions. This will help drive organic growth for both at-home and away-from-home channels. Volumes are also expected to pick up on strong sales of some of its product lines, including juice, value-added dairy and plant-based beverages. However, on a reported basis, sales are expected to decline amid forex headwinds. We expect the company’s profitability to improve, driven by refranchising of bottling operations. We thus expect a 1% uptick in adjusted earnings per share, despite a 2.5% expected fall in revenues.

Looking at the previous quarter, Coca-Cola’s revenue of $12.4 billion reflected a 3% growth on a reported basis. However, sales grew a solid 15% on an organic basis, led by a 9% growth in price/mix and a 6% rise in concentrate sales. Looking at segments – Europe, the Middle East and Africa, and Latin America – saw over 20% organic sales growth. Coca-Cola also saw a 120 bps y-o-y rise in operating margin to 32.8% in Q2. Higher revenues and margin expansion resulted in the bottom-line rising 7% to $0.84 during the quarter.

Coming to the valuation, we estimate Coca-Cola valuation to be $69 per share, close to its current market price. Our forecast is based on a 24x P/E multiple for KO and expected earnings of $2.86 per share for the full year 2024. This 24x figure aligns with the stock’s average P/E ratio over the last five years.

KO stock has risen 21% this year, broadly aligning with the S&P500 index, up 23%. Looking at a slightly longer period, the returns for KO stock were considerably less volatile than the S&P 500. Similarly, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. But, it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

While Coca-Cola stock looks appropriately priced, check out how Coca-Cola Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 10/22/2024
[2] Cumulative total returns since the end of 2016