A month has gone by since the last earnings report for Coca-Cola (KO). Shares have lost about 9.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Coke due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Coca-Cola Q4 Earnings & Revenues Beat Estimates

Coca-Cola delivered top and bottom-line beat in fourth-quarter 2019. Revenues benefited from robust volume and strong pricing. Further, the company provided the outlook for 2020.

Coca-Cola’s fourth-quarter 2019 comparable earnings of 44 cents per share beat the Zacks Consensus Estimate of 43 cents and improved 1% from the year-ago period. Currency translations negatively impacted earnings by 8%.

Revenues of $9,068 million surpassed the Zacks Consensus Estimate of $8,893 million and rose 16% year over year. Organic revenues grew 7%. The increase in reported as well as organic revenues was attributed to higher concentrate sales and price/mix. Further, increase in global value share, particularly in total non-alcoholic ready-to-drink (NARTD) beverages, aided the top line.

Volume and Pricing

Price/mix rose 5%, driven by favorable contributions from all geographic regions and Bottling Investments. Meanwhile, concentrate sales improved 2%, owing to nearly 1% gain from one extra day in the quarter. However, concentrate sales lagged unit case volume growth by 1 percentage point on reduction in bottler inventory levels related to Brexit.

Coca-Cola’s total unit case volume was up 3% in the fourth quarter on robust growth in developing and emerging markets along with strength in developed markets.

Category Cluster Performance: Sparkling soft drinks unit case volume was up 3% (compared with a 2% increase in the prior quarter), aided by strong growth in China, Brazil and Southeast Asia. Sparkling soft drinks growth was led by the Coca-Cola trademark, with rise in volume across all geographic segments. Volume for juice, dairy and plant-based beverages were flat year over year (compared with flat volume in the last reported quarter) on strong gains from Chi in West Africa and Innocent Juices in Europe, offset by a decline in Rani in the Middle East. Strategic downsizing of key packages in the China juice portfolio impacted juice volume growth in the reported quarter. Water, enhanced water and sports drinks improved 2% (same as growth witnessed in the third quarter), and tea and coffee volume grew 4% (compared with 4% growth in the third quarter).

Segmental Details

Revenues grew 4% for North America, 20% for Latin America and 10% for the Asia Pacific segment. Meanwhile, revenues for the Europe, Middle East & Africa (“EMEA”) segment declined 3%. The Bottling Investments segment’s revenues grew 29% in the quarter under review. However, the Global Ventures segment reported substantial revenue growth of 292%, gaining from the Costa acquisition.

Organic revenues grew across all segments, except for EMEA, backed by consistent innovation and revenue growth initiatives within sparkling soft drinks, with solid pricing and mix across all regions. Organic revenues improved 26% for Latin America, 4% for North America and 8% for the Asia Pacific, and 11% for the Global Ventures segment. The Bottling Investments segment recorded organic revenue growth of 4%. However, organic revenues for EMEA declined 2% in the reported quarter.

Margins

Comparable currency-neutral operating income grew 23% on strong organic revenue growth as well as gains from productivity initiatives and acquisitions. Comparable operating margin expanded 108 basis points (bps).

Guidance

Coca-Cola outlined the outlook for 2020. It estimates organic revenue growth of 5% in 2020, driven by slight gains from acquisitions, divestitures and structural items. Further, it expects currency headwinds of 0-1% on revenues in 2020.

The company anticipates comparable currency-neutral operating income growth of 8%. It expects the impacts of acquisitions, divestitures and structural items to be immaterial on comparable operating income for the year. However, foreign exchange is expected to hurt comparable operating income by 2-3%.

It expects comparable earnings per share of $2.25 in 2020, reflecting a 7% increase from $2.11 reported in 2019. Underlying effective tax rate is estimated at 19.5%.

Moreover, the company expects cash from operations of $10 billion in 2020, with capital expenditure of $2 billion. This is likely to result in free cash flow (non-GAAP) of $8 billion.

For the first quarter of 2020, it anticipates comparable net revenues to include 0-1% benefit from acquisitions, divestitures and structural items. Meanwhile, currency headwinds are likely to hurt comparable net revenues by 2% and comparable operating income by 5%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -8.24% due to these changes.

VGM Scores

Currently, Coke has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Coke has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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