...yesterday's pouting might get it done after all. <g>
Coke stock primed for split, analysts say
April 15, 1998 08:59 PM
By June Preston
ATLANTA, April 15 (Reuters) - Coca-Cola Co. stock is primed for a split, analysts said Wednesday.
"The surprise would be if it didn't split," PaineWebber analyst Emanuel Goldman said. "The way things are happening with the market, I'd say it could come soon."
Goldman said historically Coke stock has split when it was trading at $80 a share or higher. The company's last three stock splits, all two-for-one splits, occurred on May 1, 1996; May 1, 1992, and May 1, 1990.
Coca-Cola's stock hit its 52-week high of 81-5/16 in early April and, before a setback Wednesday, the stock was up nearly 17 percent since the beginning of the year.
Late in the session Wednesday, Coke was off 1-3/8 to 76-7/16 in trading on the New York Stock Exchange; it closed down 1-1/8 at 76-11/16.
Coca-Cola's Chairman and Chief Executive Officer M. Douglas Ivester told shareholders Wednesday at the company's annual meeting in Wilmington, Del., that they would have to authorize more shares before a split could take place, but he confirmed it could happen soon.
"The market has advanced so quickly," he said. "We'll have to do it sooner than expected."
Analyst Jennifer Solomon at Salomon Smith Barney agreed that Coca-Cola's stock was poised for a split based on the $80-a-share formula.
"That's very consistent with where they have been in the past," Solomon said. "The stock has had quite a move. I think it has surprised everyone that it has moved so fast."
As shareholders met in Wilmington, the company reported in Atlanta that the strength of the U.S. dollar against overseas currencies in the first quarter had a negative impact on earnings.
Coca-Cola said earnings fell 13 percent from a year earlier to $857 million, or $0.34 a diluted share. The earnings were in line with Wall Street expectations, and Goldman said that was why share prices turned downward Wednesday.
"The price was off today because all they did was meet (analysts') forecasts," Goldman said. "You have to beat forecasts to drive the price up. That's how the market works. It's a cruel world out there."
He said Coca-Cola's volume growth was the real benchmark of the company's strength.
"They have a very strong volume power overseas, which is a very key factor in the ability to grow earnings," he said. "The overseas volume was up 11 percent."
Analysts calculated a non-North America volume increase of 11 percent from Coca-Cola's reported growth in worldwide unit-case volume of 14 percent, which included a 6 percent rise for its mainstay North American market, Goldman said.
"The whole quarter was strong in terms of volume. It's the volume that really drives the stock price," Goldman said. "They have very strong volume power overseas, which is a key factor in the ability to grow earnings."
Solomon said the earnings decline was no surprise and noted other companies doing business overseas also had reported earnings were off for the quarter.
"I think if you look at other names they do business with, Gillette G and Procter (& Gamble Co) PG ), there wasn't anything surprising in the numbers."
She said Coke has made strong gains in U.S. market share over rival Pepsi over the past two years, but that could change because PepsiCo Inc. PEP recently brought in a new North America management team.
Ivester, who became Coca-Cola's chairman last fall after the death of Roberto Goizueta, who had led Coke for 19 years, has already begun putting his own imprint on the company.
On Wednesday, Coca-Cola's board elected Charles Frenette a senior vice president. Last month, Ivester named Frenette, 45, to head up the company's marketing division beginning May 1. He previously was president of the company's South Africa division for two years.
The company already has in place extensive worldwide marketing campaigns, including sponsorship of FIFA World Cup soccer through the year 2006.
((-Atlanta newsroom - 404-870-7340)) REUTERS |
