How Coca-Cola’s Valuation Looks before 4Q17 Results
Valuation prior to 4Q17 results
Coca-Cola (KO) is scheduled to announce its 4Q17 and 2017 results on February 16, 2018. The leading soda drink maker was trading at a 12-month forward PE (price-to-earnings) ratio of 22.3x on February 12, 2018. Its forward valuation multiple has declined 6.3% since the announcement of its 3Q17 results in October 2017.
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Valuation of peers
As of February 12, 2018, PepsiCo (PEP), Dr Pepper Snapple (DPS), and Monster Beverage (MNST) were trading at 12-month forward PE ratios of 20.2x, 23.2x, and 36.6x, respectively. Coca-Cola and its peers are trading at higher valuations than the forward PE ratio of 18.2x for the S&P 500 Index (SPX-INDEX).
The 12-month forward PE ratio differs among companies in the same sector due to different earnings growth expectations and several other factors, including risk.
For 2017, Coca-Cola’s revenue is expected to decline 15.8% to $35.2 billion. Its adjusted EPS (earnings per share) is anticipated to remain at $0.91. For 2018, analysts currently expect the company’s revenue to decline 12.2% and adjusted EPS to rise 5.2%. Improvement in the company’s bottom line in 2018 is expected to be driven by its productivity initiatives.
Coca-Cola’s volumes have been weak due to difficult market conditions in certain regions and the shift in consumer tastes from soda beverages to healthier choices. The company is also trying to improve its soda volumes by innovating low or no-calorie versions.
We’ll look at analysts’ recommendations for Coca-Cola stock in the next part of this series.