As The Coca-Cola Company (NYSE:KO) released its earnings announcement on 31 December 2018, analysts seem cautiously optimistic, as a 34% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of -20%. Presently, with latest-twelve-month earnings at US$6.7b, we should see this growing to US$8.9b by 2020. Below is a brief commentary around Coca-Cola’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Can we expect Coca-Cola to keep growing?
The view from 19 analysts over the next three years is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for KO, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
From the current net income level of US$6.7b and the final forecast of US$10b by 2022, the annual rate of growth for KO’s earnings is 11%. This leads to an EPS of $2.44 in the final year of projections relative to the current EPS of $1.57. With a current profit margin of 21%, this movement will result in a margin of 27% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Coca-Cola, there are three important aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Coca-Cola worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Coca-Cola is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Coca-Cola? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.