Coca-Cola Company (NYSE: KO) earnings release for the 1st quarter of their 2020 fiscal year
Category: Stock Market and Coca-Cola
Date: 22 April 2020 Stock Price: $45.38 We take a look at the 1st quarter earnings report of their 2020 fiscal year of The Coca-Cola Company the world's best known beverage maker, that owns brands such as Coca-Cola, Fanta, Minute Maid, Powerade and Costa Coffee.
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About Coca-Cola
The Coca-Cola Company (NYSE: KO) is a total beverage company, offering over 500 brands in more than 200 countries and territories. In addition to the company’s Coca-Cola brands, our portfolio includes some of the world’s most valuable beverage brands, such as AdeS soy-based beverages, Ayataka green tea, Dasani waters, Del Valle juices and nectars, Fanta, Georgia coffee, Gold Peak teas and coffees, Honest Tea, innocent smoothies and juices, Minute Maid juices, Powerade sports drinks, Simply juices, smartwater, Sprite, vitaminwater and ZICO coconut water. We’re constantly transforming our portfolio, from reducing sugar in our drinks to bringing innovative new products to market. We’re also working to reduce our environmental impact by replenishing water and promoting recycling. With our bottling partners, we employ more than 700,000 people, helping bring economic opportunity to local communities worldwide.
Overview of Coca-Cola's 1st quarter 2020 earnings report
Data below refers to the latest quarter unless specified otherwise:
- Revenues: $8.601 billion (up from $8.694 billion for the same period of the previous year)
- Revenues decreased by -1% over the last 12 months
- Cost of goods sold: $3.371 billion (up from $3.365 billion for the same period of the previous year)
- Cost of goods sold increased by 0.2% over the last 12 months
- Net earnings: $2.775 billion (up from $1.678 billion for the same period of the previous year)
- Diluted earnings per share: $0.64 (up from $0.39 for the same period of the previous year)
- PE ratio: 17.1
- Diluted weighted-average shares outstanding: 4.325 billion (up from 4.306 billion for the same period of the previous year)
- Cash and cash equivalents: $13.561 billion
- Cash and cash equivalents per share: $3.13
- Cash and cash equivalents makes up 6.9% of Coca-Cola's market capital
- Cash and cash equivalents makes up 14.4% of Coca-Cola's total assets
- Accounts receivable: $4.430 billion
- Accounts receivable makes up 4.71% of Coca-Cola's total assets
- Inventories: $3.558 billion
- Inventories makes up 3.78% of Coca-Cola's total assets
- Goodwill: $16.673 billion
- Essentially the goodwill shows the value of Coca-Cola's brand names.
- Goodwill pe share: $3.85
- We therefore estimate that 8.49% of Coca-Cola's stock price is made up by the value of their brand's
- Goodwill makes 17.73% of of Coca-Cola's total assets
- Stockholders equity in Coca-Cola: $19.834 billion
- Stockholders equity per share: $4.58
- So Coca-Cola is trading a 10 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms ten to trade at.
- To put this in perspective the S&P500 trades at a price to book value of 3.34. Read more about the S&P500 here
- Cash generated from operations: $556 million:
- Cash generated from operations per share: $0.13
Coca Cola's management commentary on their 1st quarter 2020 earnings report
ATLANTA, April 21, 2020 – The Coca-Cola Company today reported first quarter 2020 results and provided insight into how the company is navigating through the ongoing coronavirus pandemic. The Coca-Cola system continues to work to ensure the safety and support of its employees, consumers, customers and communities during this challenging time
We sincerely thank those who have been working to keep all of us safe through the crisis, particularly those on the front lines in the healthcare community. I also want to recognize our system associates, who are ensuring we can continue to supply beverages around the world," said James Quincey, chairman and CEO of The Coca-Cola Company. "Our approach to navigating the pandemic is grounded in our company’s purpose, which ensures that we continuously strive to make a difference for people in the communities we serve around the world. We’ve been through challenging times before as a company, and we believe we're well positioned to manage through and emerge stronger. The power of the Coca-Cola system is our greatest strength in times of crisis. The resilience of our people, the equity of our brands and the strength of our bottling partners continue to be competitive advantages in the market."
We sincerely thank those who have been working to keep all of us safe through the crisis, particularly those on the front lines in the healthcare community. I also want to recognize our system associates, who are ensuring we can continue to supply beverages around the world," said James Quincey, chairman and CEO of The Coca-Cola Company. "Our approach to navigating the pandemic is grounded in our company’s purpose, which ensures that we continuously strive to make a difference for people in the communities we serve around the world. We’ve been through challenging times before as a company, and we believe we're well positioned to manage through and emerge stronger. The power of the Coca-Cola system is our greatest strength in times of crisis. The resilience of our people, the equity of our brands and the strength of our bottling partners continue to be competitive advantages in the market."
Full Year 2020 Considerations
As the coronavirus pandemic continues to evolve, there is uncertainty around its ultimate impact; therefore, the company's full year financial and operating results cannot be reasonably estimated at this time. For comparable net revenues (non-GAAP), the company expects a mid single-digit currency headwind based on the current rates and including the impact of hedged positions. For comparable operating income (non-GAAP), the company expects a high single-digit currency headwind based on the current rates and including the impact of hedged positions. The company’s underlying effective tax rate (non-GAAP) is estimated to be 19.5%.
As the coronavirus pandemic continues to evolve, there is uncertainty around its ultimate impact; therefore, the company's full year financial and operating results cannot be reasonably estimated at this time. For comparable net revenues (non-GAAP), the company expects a mid single-digit currency headwind based on the current rates and including the impact of hedged positions. For comparable operating income (non-GAAP), the company expects a high single-digit currency headwind based on the current rates and including the impact of hedged positions. The company’s underlying effective tax rate (non-GAAP) is estimated to be 19.5%.
Coca-Cola (NYSE: KO) stock price history
The image below, obtained from Google, shows the stock price history of Coca-Cola over the last 5 years. And it's been a fairly average time for Coca-Cola stockholders. 5 years ago the stock was trading at around $41.00 a stock and its currently trading at $45.38 a stock. That's very modest return of 10.6% provided to Coca-Cola stockholders over the last 5 years.
The stock of Coca-Cola is trading at a lot closer to its 52 week low of $36.27 than it is to its 52 week high of $60.13, which to us is a clear indication that the short term sentiment and momentum towards Coca-Cola's stock is negative at this point in time. It is not really surprising considering the significant market sell off triggered by the Covid-19 pandemic and the impact its having on global economic growth. Read more about the stock market sell off here.
The stock of Coca-Cola is trading at a lot closer to its 52 week low of $36.27 than it is to its 52 week high of $60.13, which to us is a clear indication that the short term sentiment and momentum towards Coca-Cola's stock is negative at this point in time. It is not really surprising considering the significant market sell off triggered by the Covid-19 pandemic and the impact its having on global economic growth. Read more about the stock market sell off here.
Recent coverage of Coca-Cola
The extract below covers the latest news regarding Coca-Cola as obtained from Investopedia.com
Dow component The Coca-Cola Company (KO) reports earnings ahead of Tuesday's opening bell, with analysts expecting earnings per share (EPS) of $0.45 on first quarter 2020 revenue of $8.3 billion. The stock got pummeled in the first quarter, dropping nearly 40% in the biggest decline since 2008. However, it took 14 months to carve a 43% loss at that time, while this year's rout unfolded in less than five weeks. The massive destruction failed a major breakout and ended the 11-year uptrend, even though the forward dividend yield has risen to a generous 3.41%.
Company sales are closely levered to partnerships and distribution agreements with major restaurant and theater chains, theme parks, and other entertainment venues that have been forced to close or curtail operations due the coronavirus pandemic. In addition, Coca-Cola's product line isn't as diverse as rival PepsiCo, Inc.'s (PEP) broad selection of snacks, staples, and cereals, with Coke's products dominated by upscale soft drinks that are likely to lose market share during an economic downturn.
The beverage giant's stock has bounced in the past month, but it's still trading below new resistance at the 50- and 200-day exponential moving averages (EMAs). Buying power has barely dented the first quarter shareholder loss, raising the odds that sellers will reload positions and dump price into a test at the March low in the mid-$30s. A breakdown will expose additional downside into the low $30s, where a 2011 breakout marked the start of a multi-year bull run.
Read the full article here
Dow component The Coca-Cola Company (KO) reports earnings ahead of Tuesday's opening bell, with analysts expecting earnings per share (EPS) of $0.45 on first quarter 2020 revenue of $8.3 billion. The stock got pummeled in the first quarter, dropping nearly 40% in the biggest decline since 2008. However, it took 14 months to carve a 43% loss at that time, while this year's rout unfolded in less than five weeks. The massive destruction failed a major breakout and ended the 11-year uptrend, even though the forward dividend yield has risen to a generous 3.41%.
Company sales are closely levered to partnerships and distribution agreements with major restaurant and theater chains, theme parks, and other entertainment venues that have been forced to close or curtail operations due the coronavirus pandemic. In addition, Coca-Cola's product line isn't as diverse as rival PepsiCo, Inc.'s (PEP) broad selection of snacks, staples, and cereals, with Coke's products dominated by upscale soft drinks that are likely to lose market share during an economic downturn.
The beverage giant's stock has bounced in the past month, but it's still trading below new resistance at the 50- and 200-day exponential moving averages (EMAs). Buying power has barely dented the first quarter shareholder loss, raising the odds that sellers will reload positions and dump price into a test at the March low in the mid-$30s. A breakdown will expose additional downside into the low $30s, where a 2011 breakout marked the start of a multi-year bull run.
Read the full article here
Coca-Cola (NYSE: KO) latest stock valuation
So what is Coca-Cola's stock worth based on the release of their latest earnings report and their fiscal guidance provided? Based on Coca-Cola's latest earnings report and their outlook our valuation models provide a target price (full value price) of Coca-Cola's stock at $41.60 a stock (down from our 3rd quarter 2019 valuation of Coca-Cola) . Based on our target price (full value price) we believe the stock of Coca-Cola's is overvalued.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target price (full value price) which in this case is $41.60, so a good entry point into Coca-Cola's stock would be at $37.40 or below. We expect the stock of Coca-Cola's to pull back in coming weeks and months to levels closer to our target price.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target price (full value price) which in this case is $41.60, so a good entry point into Coca-Cola's stock would be at $37.40 or below. We expect the stock of Coca-Cola's to pull back in coming weeks and months to levels closer to our target price.
Next earnings release of Coca-Cola
It is expected that Coca-Cola will release their 2nd quarter 2020 earnings report in late July 2020