CFRA has adjusted the price target for Coca-Cola (NYSE: NYSE:KO) shares, reducing it to $70 from the previous $72, while maintaining a Hold rating on the stock.
The new target reflects a price-to-earnings (P/E) ratio of 23.0x for the year 2025, which is below Coca-Cola's five-year average forward P/E of 24.4x. This revision comes despite Coca-Cola's third-quarter earnings surpassing expectations, with an adjusted earnings per share (EPS) of $0.77, which is $0.03 higher than the same quarter last year and $0.02 above consensus estimates.
Coca-Cola's sales performance exceeded forecasts, with revenue declining marginally by 1% to $11.85 billion, which was $240 million ahead of consensus. This was primarily due to a combination of currency impacts, acquisitions, divestitures, and concentrate sales, which were somewhat balanced by a positive price and mix variance. However, the company's gross margin saw a slight decrease of 30 basis points to 60.7%, falling short of consensus by 90 basis points.
Despite the better-than-expected third-quarter results, Coca-Cola has decided to maintain its adjusted EPS growth guidance for 2024 at 5%-6%, which suggests an EPS range of $2.82 to $2.85. This guidance aligns with the current consensus estimate of $2.85.
In other recent news, Coca-Cola has shown significant financial performance and strategic developments. The company's third-quarter results revealed a 15% rise in organic sales, surpassing consensus projections, with earnings per share hitting $0.84, exceeding expectations. Analysts from firms such as HSBC (LON:HSBA), TD Cowen, Truist Securities, and Argus have responded positively to these results, raising their price targets for Coca-Cola. However, CFRA has downgraded Coca-Cola's stock from Buy to Hold due to valuation concerns, despite the company's robust performance.
Coca-Cola has also announced plans to invest an additional $1 billion in Nigeria over the next five years, demonstrating a commitment to global expansion. This follows a previous investment of $1.5 billion since 2013. The company's operations in the West Bank, however, are facing challenges due to a critical shortage of cans and sugar resulting from the closure of a key Jordan border crossing.
In other company news, Coca-Cola's shares decreased by 4.7% following the suspension of its annual forecast and a decline in preliminary fourth-quarter revenue and profit. Conversely, Texas Instruments (NASDAQ:TXN)' shares climbed 3.1% after reporting a third-quarter profit that exceeded expectations, while McDonald's (NYSE:MCD) experienced a 7% drop in shares after an E.coli outbreak linked to its Quarter Pounder hamburgers resulted in one death and multiple illnesses. These are the recent developments in the company's journey.
InvestingPro Insights
Coca-Cola's financial performance and market position offer additional insights for investors. According to InvestingPro data, the company boasts impressive gross profit margins, reflecting its strong pricing power and operational efficiency. This aligns with the article's mention of Coca-Cola's positive price and mix variance, which helped offset other factors affecting revenue.
An InvestingPro Tip highlights that Coca-Cola has raised its dividend for 54 consecutive years, underscoring its commitment to shareholder returns and financial stability. This long-standing dividend policy may provide some reassurance to investors, especially in light of the analyst's decision to maintain a Hold rating and lower the price target.
Another relevant InvestingPro Tip notes that the stock generally trades with low price volatility. This characteristic could be appealing to risk-averse investors, particularly given the recent market highs and the analyst's concerns about potential headwinds.
For a more comprehensive analysis, InvestingPro offers 10 additional tips that could provide further insights into Coca-Cola's financial health and market position.
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