Coca Cola (NYSE:KO) will release its third quarter numbers before the market opens on Wednesday, 21st October, and investors are waiting in anticipation. I just think this company has been battling against some adverse trends recently (which I believe are temporary) and I am convinced these underlying trends (which we will discuss in this preview) will abate in the not too distant future. Past earnings numbers would definitely imply that the company will beat analyst expectations next Wednesday, as the company has consistently topped analysts EPS predictions since 2013. Revenue is a different story as analyst expectations actually exceeded actual revenues in the corresponding quarter of 2014. (see chart below)
Based on current open interest, option premium and earnings history, I don’t envisage the stock moving a lot after Coca Cola earnings are reported. I have already written on why this company is an excellent long term hold and should be aggressively bought on any meaningful pullback. If revenues disappoint once more ( $11.55 billion predicted on an EPS of $0.50), Coca Cola stock could easily drop back to the $40 a share level which I believe will be heavily defended. The long term fundamentals of this stock are still sound and the company’s temporary headwinds will eventually subside.
Weakening Dollar To Improve Revenue
Firstly, when you look at the chart above, it is quite evident that revenue dropped sharply since the second quarter of 2014 but then rebounded sharply in the last quarter. Analysts are not making much of this as they see it as seasonal which in part is correct when you also see the spike in revenues in the second quarter of 2014. The second quarter historically has always been this company’s highest revenue generating quarter but the company’s most recent quarter is far better in my opinion than many analysts believe. Why? Well we have to look to the dollar for our answer (see chart below).
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