Charles from briefing.com another bearish view of KO
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COCA-COLA CO. (KO) 80 1/2 +1 1/2. The interest in this beverage company continues to amaze us as for the second consecutive day Wall Street lowers estimates, but the stock just keeps moving along. Yesterday, Merrill Lynch trimmed estimates on this soft drink maker due to concerns over Asia and the stronger dollar trend. While the stock traded much lower during intraday trading, it only lost 5/16 of a point at the end of the day. Today, Morgan Stanley Dean Witter lowered estimates as well, but the stock has managed to rally, in light of the surge in the overall stock market. Acting on similar reasons as Merrill, Morgan Stanley lowered 1998 EPS from $1.60 to $1.58, keeping the firm's projections four cents below the current Wall Street consensus. At the same time, it shaved 1999 earnings projection from $1.87 to $1.84. The current consensus estimate for 1999 is $1.89 a share. While these reductions in earnings estimates are minor, they highlight the vulnerability earnings will have to a rising dollar. Unit case volume growth for 1998 is again expected to rise, but much less than last year's gain of 9%. And while Coke is not expected to generate any benefits from the sale of any bottling units this time around, the risk is that earnings will need to be clipped some more due to deteriorating market conditions in Asian and Latin America. Remarkably, the problems in overseas markets, currency or otherwise, are being overlooked by participants, especially institutional investors. Coke is still a darling on Wall Street even though the stock trades at multiples that are hard to justify for a non-growth company. And given the outlook for anemic unit case volume growth in 1998 and overall sales that are likely to be down due to currency translation problems, the multiples are even more outrageous. Yet, the stock continues to move up as institutions buy on dips.
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