Q3 Preview: Coca-Cola (KO) to Rely on Emerging Markets Once Again

The Coca-Cola Company (NYSE: KO) shares are down about 1 percent Monday afternoon heading into the company's third-quarter results, due out Tuesday before the market opens.

Coca-Cola is expected to post sales of $12.02 billion and earnings of $1.02 per share.

The stock moved 1.1 percent higher through the quarter and is 0.9 percent lower since. Shares of KO are up 4.9 percent over 2011. Coca-Cola has traded within a rage of $59.80 to $71.77 over the last 52-week time frame.

Coca-Cola stock is trading for 16x forward earnings, compared with 13.3x for PepsiCo (NYSE: PEP), and 13.9x for Kraft Foods (NYSE: KFT).

Data from Bloomberg has 15 analysts with a Buy rating on Coca-Cola, five at Hold, and none with a Sell. The price target average is $77, with a low of $73 and high of $95.

Analyst Comments

• Goldman Sachs is modeling earnings of $1.02. Goldman doesn't see the quarter as being a catalyst for Coca-Cola. Global growth should be about 4 percent in the quarter, with flat volume in the U.S., and softer European volume both being offset by continued Emerging Market growth.
  
  Goldman says, "Our +11% FX-neutral EBIT growth forecast for 3Q reflects solid volume growth (+4%), higher price/mix (+1% to 2%) and addition of the CCE NA business. Importantly, we are encouraged by recent indications of higher soda pricing in the US."
  
  
• JPMorgan sees earnings of $1.03, slightly ahead of Street views. North American volume expected to be flat-to-down-slightly resulting from continued weak demand and a greater impact from price increases. "Management implemented a +3-4% price increase in the July/August timeframe across the NA beverage portfolio. The impact to consumers shopping at Walmart will be a few points higher than the +3-4% given retailer funded discounts in the comparison period. In addition, we note that the company faces a +2% volume comp in Q3. We would expect volumes to be challenged by pricing and the rollout of new, smaller package sizes."
  
  
• Wells Fargo sees earnings of $1.02. Sees "global volume growth of 4%, a price mix benefit of 2%, and a low-mid single digit favorable currency benefit. We believe the risk/reward ratio is positive on KO shares heading into earnings as the sentiment has recently softened due to concerns over challenging consumer and currency trends. We still believe that KO is among the best positioned consumer staples companies, and think valuation is compelling at 10.8x our FTM EBTIDA estimate vs. the 5-yr average of 12.4x."
  
  Wells Fargo noted Nielsen scanner data for the period ending 9/3/11 showed soft volumes in key categories that had corresponding increases in price, notably CSD’s and juices & juice drinks.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Coca-Cola's past performance at Streetinsider's Coca-Cola Income Statement.

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