The Coca-Cola Company (NYSE: KO) shares have advanced more than 10% since the beginning of January 2022, and the current price stands less than $2 below their record highs.
This Monday, Coca-Cola reported better than expected first-quarter results and announced that it gained value share in total nonalcoholic ready-to-drink beverages.
Bank of America maintained a Buy rating on Coca-Cola
Coca-Cola reported better than expected first-quarter results this Monday; total revenue has increased by 16.7% Y/Y to $10.5 billion, while the Non-GAAP earnings per share were $0.64 (beats by $0.06).
First-quarter results reflect continued momentum in core business areas, and the company’s management said that volume performance was driven by continued investments in the marketplace together with benefit from cycling the impact of the pandemic in the prior year.
Organic sales were up 18% during the quarter, and it is important to say that Europe, the Middle East & Africa region saw a 22% jump in organic sales. Latin America had a 39% increase in organic sales, while organic sales were 14% higher in North America.
The operating margin was 32.5% of sales compared with 30.2% in the first quarter of 2021, and the company announced that it gained value share in total nonalcoholic ready-to-drink beverages.
Coca-Cola suspended its business in Russia as a result of the conflict in Ukraine, but according to the company’s management, this would impact FY2022 results as follows: 1% impact on unit case volume; 1% to 2% impact on net revenues and operating income; $0.04 impact to comparable EPS.
The company’s Q1 earnings report impressed analysts, and Bank of America maintained a Buy rating on Coca-Cola shares with a price target of $70. Bank of America expects Coca-Cola to emerge from the COVID-19 crisis in a stronger position and expressed confidence for the upcoming quarters.
Morgan Stanley said that Coca-Cola had another strong quarter and reported that the company is well-positioned compared to peers in a turbulent consumer packaged goods environment.
Wells Fargo also stayed constructive on Coca-Cola shares after first-quarter results and said that full-year organic sales guidance from Coca-Cola implies +4 to +5% delivery for the remainder of the year.
Coca-Cola is in a good position to grow its business, but with a $282 billion market capitalization, this company is not undervalued, and the risk/reward ratio is not good enough for “value” investors currently.
Coca-Cola trades at more than twenty times TTM EBITDA, the book value per share is less than $6, and if the U.S. stock market enters a more significant correction phase, the share price could be at much lower levels.
$60 represents an important support level
Data source: tradingview.com
If the price jumps above $68, it would be a signal to trade shares, and the next target could be around $70.
Rising above $70 supports the continuation of the bullish trend for Coca-Cola shares, but if the price falls below $60, it would be a strong “sell” signal.
Summary
Coca-Cola reported better than expected first-quarter results and announced that it gained value share in total nonalcoholic ready-to-drink beverages. Coca-Cola is in a good position to grow its business, but this stock is not undervalued, and if the U.S. stock market enters a more significant correction phase, the share price could be at much lower levels.
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