Is Coca-Cola a Buy Post Earnings?

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With shares of Coca-Cola (NYSE:KO) trading around $40, is KO an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Coca-Cola is a beverage company that engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. Its sparkling beverages include carbonated energy drinks, carbonated waters, and flavored waters. The company’s still beverages comprise nonalcoholic beverages like non-carbonated waters, flavored and enhanced waters, non-carbonated energy drinks, juices and juice drinks, ready-to-drink teas and coffees, and sports drinks. Coca-Cola Co. sells its products under the Coca-Cola, Diet Coke, Coca-Cola Light, Coca-Cola Zero, Sprite, Fanta, Minute Maid, Powerade, Aquarius, Dasani, Glacéau Vitaminwater, Georgia, Simply, Del Valle, Ayataka, and I Lohas brand names.

Coca-Cola reported better-than-expected quarterly revenue as strong sales in China more than offset a drop in Europe and flat volumes in North America. Coke’s shares, which had fallen 3.4 percent in the 12 months to Monday’s close, were up 3 percent in early trading. Global case volumes rose 2 percent in the quarter, while those in China rose 12 percent due to increased marketing around the Chinese New Year, the company said on Tuesday. Coke does not break out China sales separately. The business falls under its Asia-Pacific region, the company’s second-biggest market by revenue. In 2013, the region accounted for 13 percent of overall sales.

Sales in North America, the company’s biggest market, were stable despite an unusually cold winter and the general consumer shift away from fizzy drinks. ”Our North America Group delivered even volume versus the prior year quarter while gaining value share and maintaining volume share,” the company said in a statement. Sales declined 4 percent in Europe, but rose 6 percent in both India and Russia. ”We’re beginning to get our momentum back,” Chief Executive Muhtar Kent said on CNBC.

T = Technicals on the Stock Chart are Strong

Coca-Cola stock has made positive progress over the past several years. The stock is currently trading near highs for the year and looks set to continue this path. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Coca-Cola is trading above its rising key averages which signal neutral to bullish price action in the near-term.

KO

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Coca-Cola options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Coca-Cola Options

13.98%

1%

0%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

May Options

Flat

Average

June Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

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