Coca-Cola (KO) is expected to report "strong" second-quarter results amid robust North America trends, though ongoing macro uncertainty could prompt the company to remain conservative in its outlook, RBC Capital Markets said Friday.
The beverages giant is scheduled to report June quarter results Tuesday. RBC projects earnings at $0.93 a share, which it said would match Wall Street's estimates. The brokerage pegs net sales for the quarter at $13.06 billion versus the Street's $13.13 billion views, according to a note to clients.
"We expect a strong print for (Coca-Cola) with solid top- and bottom-line delivery, supported by strong (North America) trends and favorable international comps, as (the company) laps a series of temporary volume headwinds from a year ago," RBC Co-Head of Global Consumer and Retail Research Nik Modi said. "As a reminder, the timing differences in (Coca-Cola's) calendar days this year are unique and create an odd phasing with a strong (first quarter) and soft (fourth quarter)."
US bottlers are seeing "solid" sales trends, with momentum likely to continue into the ongoing quarter, RBC said.
"Given the consumer/geopolitical environment, a modestly more cautious tone from (the management) and the need for unit cases to still need to catch up as the year progresses, we would expect (Coca-Cola) to not get ahead of themselves and maintain some prudence and reiterate guidance," Modi wrote.
RBC has an outperform rating and an $87 price target on the company's stock. Its shares were up 1.3% in Friday late-afternoon trade, bringing its year-to-date gains to 18%.
Last week, UBS Securities said US consumer staple companies likely faced a "tricky" second quarter, with earnings growth seen impacted to a certain extent by inflation. The brokerage named Coca-Cola among the major names with favorable setups heading into the latest results.
Coca-Cola was quick to respond to a recent ransomware attack, with no evidence of "broader enterprise system compromise," Modi said Friday, adding that the extent of full scope and restoration timeline are still unknown.
"While the situation warrants watching, the brand operates in high-loyalty categories with limited substitutability, and (Coca-Cola) has the scale and financial flexibility to absorb a transitory brand level disruption," Modi wrote.
Price: $82.07, Change: $+0.89, Percent Change: +1.10%
