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Here's Why Coca-Cola (KO) Looks Poised for Earnings Beat in Q3

Zacks Equity Research
·4-min read

The Coca-Cola Company KO is expected to register top and bottom-line growth when it reports third-quarter 2021 numbers on Oct 27, before the opening bell. The Zacks Consensus Estimate for the company’s third-quarter earnings stands at 58 cents, suggesting growth of 5.5% from the year-ago quarter’s reported figure. The consensus mark has been unchanged in the past 30 days.

For third-quarter revenues, the consensus mark is pegged at $9.6 billion, suggesting 10.9% growth from the prior-year quarter’s reported figure.

In the last reported quarter, the leading soft-drink behemoth delivered an earnings surprise of 19.3%. Its bottom line beat the Zacks Consensus Estimate by 16.5%, on average, over the trailing four quarters.

CocaCola Company The Price and EPS Surprise

CocaCola Company The Price and EPS Surprise
CocaCola Company The Price and EPS Surprise

CocaCola Company The price-eps-surprise | CocaCola Company The Quote

Key Points to Note

Coca-Cola’s results in the recent quarters have been benefiting from an improved price/mix, an increase in concentrate sales and higher unit case volume, which are expected to have continued in the third quarter. The company’s top line has been improving, owing to the increased consumer mobility and the reopening of economies in several parts, which have led to increased away-from-home channel sales.

Volume gains in the trademark Coca-Cola; sparkling flavors; the nutrition, juice, dairy and plant-based beverages; and hydration, sports, coffee and tea categories are expected to get reflected in the company’s third-quarter results. The unit volume is expected to reflect gains from recovery across markets due to the subsiding of the pandemic-led uncertainties as well as the lapping of last year’s pandemic-led impacts.

The company’s third-quarter results are expected to reflect gains from accelerating investments to expand its digital presence. Coca-Cola has been witnessing a splurge in e-commerce with the growth rate of the channel doubling in many countries. The company has been consistently strengthening consumer connections and further piloting various digital-enabled initiatives through fulfillment methods to capture the online demand, which are likely to have boosted third-quarter sales.

Aggressive cost-saving measures across the organization are also expected to have helped partly cushion the operating margin in the third quarter. This is anticipated to have aided the bottom line.

However, the company has been witnessing pressures from higher supply-chain costs, including transportation and commodity cost inflation. On the last reported quarter’s earnings call, the company stated that it expects to manage the increases in input costs through hedging. However, it remained uncertain about the effects of these pressures in the third quarter. Continued supply-chain headwinds are expected to have marred the company’s bottom line to some extent.

Higher marketing spending, and an increase in short-term incentive and stock-based compensation are also expected to have led to increased selling, general and administrative expenses in the third quarter.

Zacks Model

Our proven model predicts an earnings beat for Coca-Cola this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Coca-Cola has a Zacks Rank #3 and an Earnings ESP of +0.75%.

Other Stocks Likely to Beat on Earnings

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Albertsons Companies, Inc. ACI has an Earnings ESP of +5.97% and it currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archer Daniels Midland Company ADM has an Earnings ESP of +1.84% and it carries a Zacks Rank #2 at present.

The Estee Lauder Companies Inc. EL currently has an Earnings ESP of +0.24% and a Zacks Rank #3.


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CocaCola Company The (KO) : Free Stock Analysis Report

Archer Daniels Midland Company (ADM) : Free Stock Analysis Report

The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report

Albertsons Companies, Inc. (ACI) : Free Stock Analysis Report

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Zacks Investment Research