Best Consumer Staples Stocks To Buy Now

Key Insights

  • Consumer staples stocks provide safety during uncertain times. 
  • These stocks have recently enjoyed strong support amid geopolitical uncertainty and rising yields. 
  • Typically, such companies pay a modest dividend, which is increased year after year and provides an additional source of income for investors. 

Investors remain worried about the negative impact of rising interest rates and high commodity prices, so they search for potential safe-haven assets. One of the segments that could perform well in the inflationary environment is the consumer staples market segment. Typically, such companies can raise prices in line with inflation as they produce essential products which are in demand in every economic situation.

Procter & Gamble

Procter & Gamble stock has moved away from March lows as demand for safe-haven assets increased. Currently, analysts expect that the company will report earnings of $5.86 per share int he current year and earnings of $6.31 per share in the next year, so the stock is trading at 25 forward P/E.

This is not cheap, but traders are ready to pay a premium for safety in the current environment. A safe dividend with a forward yield of more than 2.3% serves as an additional positive catalyst for conservative investors.

Colgate-Palmolive

Colgate-Palmolive is trading at 23 forward P/E, so it is a bit cheaper than Procter & Gamble. The forward dividend yield is about 2.35%. The stock touched its yearly lows in March and started to move higher, driven by the same catalysts that pushed Procter & Gamble closer to the all-time high levels.

Coca-Cola

This classic widow-and-orphan stock is up by more than 9% year-to-date, compared to S&P 500 , which has lost more than 5% of its value since the beginning of this year.

Coca-Cola is trading at 25 forward P/E and has a forward yield of about 2.7%. Interestingly, the stock gained strong upside momentum this year, and it has a good chance to move even higher in case demand for safe-haven assets stays strong.

For a look at all of today’s economic events, check out our economic calendar.

Shares of Soft Drink Giant Coca-Cola Rise on Earnings Beat

Coca-Cola shares rose nearly 2% on Thursday after the world’s largest soft drink manufacturer reported better-than-expected earnings and revenue in the fourth quarter, but this year’s prediction was disappointing.

The most popular and biggest-selling soft drink maker reported quarterly adjusted earnings of $0.45​ per share, beating the Wall Street consensus estimates of $0.41 cents per share.

The company’s revenue jumped over 10% to $9.47 billion from a year earlier. That too topped the market expectations of $8.96 billion. However, its adjusted operating margin plunged to 22.1% from 27.3% a year earlier in the December quarter.

The company said higher inflation will continue to weigh on the company’s profits this year and predicted a weaker-than-expected profit outlook. In 2022, Coke expects comparable earnings per share growth of 5% to 6%, while analysts’ expectations were for 6.1% growth.

Coca-Cola stock traded nearly 2% higher at $62.18 on Thursday. The stock rose nearly 5% so far this year after surging about 8% in 2021.

Analyst Comments

“Net, we expect a positive stock reaction to a sizeable Q4 topline beat, with a very strong 19% underlying organic sales result in Q4 (using 9% unit cases and 10% price/mix), and robust 7-8% organic sales growth guidance for 2022, confirming our believe that with strong price/mix, limited demand elasticity, a post COVID away from home recovery, and strong underlying LT secular growth drivers, consensus revenue growth forecasts (6-6.5% for 2022) and market-implied growth expectations are too low,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“2022 EPS guidance was also good news in our minds, slightly above consensus despite likely being conservative, while Coke is also swallowing a ~2% greater negative EPS impact than expected from taxes/FX, meaning underlying fundamentals are even further above consensus. Net, Q4 results and FY22 guidance offer very clear confirmation in our view that Coke is poised to post topline upside vs consensus and market expectations (see video for our OW thesis here) short, medium, and long-term.”

Coca-Cola Stock Price Forecast

Twelve analysts who offered stock ratings for Coca-Cola in the last three months forecast the average price in 12 months of $65.33 with a high forecast of $71.00 and a low forecast of $55.00.

The average price target represents a 5.32% change from the last price of $62.03. Of those 12 analysts, 10 rated “Buy”, two rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $71 with a high of $82 under a bull scenario and $40 under the worst-case scenario. The investment bank gave an “Overweight” rating on the soft drink company’s stock.

Several analysts have also updated their stock outlook. JP Morgan raised the target price to $64 from $63. Credit Suisse lifted the target price to $66 from $63. Jefferies increased the target price to $63 from $60. CFRA upped the target price by $10 to $68.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator giving a strong buying opportunity.

Check out FX Empire’s earnings calendar

Coca-Cola Hits All-Time High

Dow component Coca-Cola Co. (KO) posted an all-time high on Tuesday, adding to two-month gains of nearly 20%. That’s quite an uptick for the normally slow mover, highlighting a broad rotation out of growth stocks and into safe havens that can, theoretically at least, withstand rising inflation.  Price action has now cleared stubborn resistance at the February 2020 peak after a pandemic-driven revenue shock, driven by empty stadiums, movie theaters, and theme parks.

Pricing Power Play

Shareholders hope the beverage giant will play catch-up with rival PepsiCo Inc. (PEP), which cleared a similar barrier during in the summer of 2021. Coke needs favorable economics and a reliable distribution network to prosper because it hasn’t diversified into non-beverage products, unlike PEP’s wide variety of snack foods. Management hasn’t helped this cause over the years, building a well-earned reputation for extreme risk avoidance.

UBS analyst Sean King pounded the tables on Tuesday, wondering if Coca-Cola is the “pricing power play of 2022”. As he notes “We believe KO checks the boxes for the key drivers of pricing power in CPG: a) market share leadership, b) category/manufacturer concentration, c) limited exposure to private label, and d) a history of rational pricing competition. We believe KO’s unique pricing & franchise model could enable it to realize a greater increase in profit per concentrate gallon than the fully burdened increase in costs associated with selling that gallon”.

Wall Street and Technical Outlook

Wall Street consensus stands at a positive ‘Overweight’ rating based upon 15 ‘Buy’, 4 ‘Overweight’, 9 ‘Hold’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $58 to a Street-high $71 while the stock is set to open Wednesday’s session about $2 below the median $64 target. This modest placement predicts slow but meaningful upside in coming months, in line with the stock’s low volatility reputation.

Coca-Cola roared in the 1990s, topping out at 44.47 in 1998. It finally returned to that resistance level 16 years later, entering a test that continued through 2020’s pandemic decline. The stock bottomed out in the 30s at that time and turned sharply higher, stair-stepping into the prior peak at the start of 2022. A six-week consolidation has now given way to higher prices, setting the stage for a rally into the upper 60s. The company currently pays a 2.71% annual dividend yield.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held Coca-Cola and PepsiCo in family accounts at the time of publication.

Preview: What to Expect From Coca-Cola’s Earnings on Thursday

Coca-Cola, the world’s largest soft drink manufacturer is expected to report its fourth-quarter earnings of $0.41 per share, which represents a year-over-year decline of over 12% from $0.47 per share seen in the same period a year ago.

However, the most popular and biggest-selling soft drink maker would post revenue growth of nearly 4% to $8.94 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

The company raised its 2021 organic revenue and comparable earnings per share (EPS) growth guidance. For 2021, it expects organic revenue growth of 13-14%, compared with the previous forecast of 12-14% growth. The company estimates an underlying effective tax rate of 18.6% for 2021, down from the previous estimate of 19.1%, according to ZACKS Research.

It estimates year-over-year comparable EPS growth of 15-17%, rather than the 12-14% growth rate expected earlier, ZACKS added.

Coca-Cola stock traded 0.70% higher at $62.03 on Tuesday. The stock rose nearly 5% so far this year after surging about 8% in 2021.

Analyst Comments

“We expect a Q4 topline beat for Coke with Thursday’s Q4 EPS to be well-received, similar to upside in each of the first three quarters of 2021, and we expect Coke to guide above or towards the higher end of consensus, with expected 6-8% organic sales growth guidance for FY22 (consensus is ~6.4%) and HSD % EPS growth inclusive of a 2-3% negative FX impact, above the 6% consensus, which includes FX. With FX pressure and Omicron uncertainty, Coke’s guidance range could be more like MSD-HSD % growth on EPS, although we would expect this guidance to ultimately prove conservative,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“Short term, we see an above-consensus post-COVID topline/EPS recovery, and longer-term, we see a return to pre-COVID outsized sales growth vs. peers, improved execution with a reorganization, and better margin performance than peers with a less onerous price/cost gap.”

Coca-Cola Stock Price Forecast

Eleven analysts who offered stock ratings for Coca-Cola in the last three months forecast the average price in 12 months of $65.18 with a high forecast of $71.00 and a low forecast of $55.00.

The average price target represents a 5.11% change from the last price of $62.01. Of those 11 analysts, nine rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price to $71 with a high of $82 under a bull scenario and $40 under the worst-case scenario. The investment bank gave an “Overweight” rating on the soft drink company’s stock.

Several analysts have also updated their stock outlook. JP Morgan raised the target price to $64 from $63. Credit Suisse lifted the target price to $66 from $63. Jefferies increased the target price to $63 from $60. CFRA upped the target price by $10 to $68.

Technical analysis suggests it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator gives mixed signals.

Check out FX Empire’s earnings calendar

Wall Street Week Ahead Earnings: KKR, Walt Disney, Coca-Cola, Twitter and PepsiCo in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 7

Monday (February 7)

TICKER COMPANY EPS FORECAST
ACM AECOM $0.77
CHGG Chegg $0.13
HAS Hasbro $0.85
LEG Leggett & Platt $0.73
ON ON Semiconductor $0.94
THC Tenet Healthcare $1.49
TSN Tyson Foods $2.01

 

Tuesday (February 8)

IN THE SPOTLIGHT: KKR

The U.S.-based investment firm KKR & Co is expected to report its fourth-quarter earnings of $1.02 per share, which represents year-over-year growth of over 108% from $0.49 per share seen in the same period a year ago.

The company that manages multiple alternative asset classes would post revenue growth of 17% to $784.8 million. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“Strong near-term growth with fundraising supercycle and GA accretion coming into earnings, but we see this reflected in the price at the current valuation for a business model with greater earnings contribution from the balance sheet (40%). While strong investment performance could drive upward estimate revisions, we have less visibility on more episodic investment income gains,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“Mgmt’s increased focus on expanding the platform with adjacent strategies and scaling successor funds should drive higher fee-related earnings (FRE).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 8

TICKER COMPANY EPS FORECAST
BP BP $1.18
IT Gartner $2.47
HOG Harley-Davidson $-0.37
LYFT Lyft $-0.46
PFE Pfizer $0.85

 

Wednesday (February 9)

IN THE SPOTLIGHT: WALT DISNEY

Walt Disney, a family entertainment company, is expected to report its fiscal first-quarter earnings of $0.68 per share, which represents year-over-year growth of over 112% from $0.32 per share seen in the same period a year ago.

The family entertainment company would post revenue growth of over 30% to $21.15 billion. The company has beaten earnings estimates in most of the quarters in the last two years, at least.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 9

TICKER COMPANY EPS FORECAST
AFG American Financial Group $2.98
CVS CVS Health $1.56
HMC Honda Motor $0.95
RDWR Radware $0.13
SGEN Seagen $-0.74
TM Toyota Motor $3.76
UBER Uber Technologies $-0.33

 

Thursday (February 10)

IN THE SPOTLIGHT: COCA-COLA, TWITTER, PEPSICO

COCA-COLA: The world’s largest soft drink manufacturer is expected to report its fourth-quarter earnings of $0.41 per share, which represents a year-over-year decline of over 12% from $0.47 per share seen in the same quarter a year ago. However, the company’s revenue would grow nearly 4% to $8.94 billion.

TWITTER: The social media giant is expected to report its fourth-quarter earnings of $0.35 per share, which represents year-over-year growth of about 8% from $0.38 per share seen in the same period a year ago.

The company would post revenue growth of over 21% to $1.57 billion. Twitter expects revenues of approximately $1.5 billion to $1.6 billion in the fourth quarter of 2021. GAAP operating income is expected to range from $130 million to $180 million, according to ZACKS Research.

With a focus on engineering and products, Twitter expects to increase headcount and costs by 30% or more in 2021. In 2021, the company expects total revenues to grow faster than expenses.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for Twitter (TWTR) given 1) continued turnaround progress and 2) platform scarcity,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

PEPSICO: The Harrison, New York-based global food and beverage leader is expected to report its fourth-quarter earnings of $1.52 per share, which represents year-over-year growth of over 3% from $1.47 per share seen in the same period a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of about 9% to $24.35 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

The company revised its organic revenue growth to 8% from 6% previously. The company estimates core earnings of $6.20 per share for 2021, compared to $5.52 in 2020, according to ZACKS Research.

PepsiCo struggles with supply-chain headwinds that have caused it to increase costs and limit its output. Investors will want to know whether the beverage company is winning this battle when it reports its financial results for the fourth quarter of 2021 on Thursday, February 10.

“For the quarter, we are expecting PepsiCo (PEP) to deliver EPS of $1.47, which implies flat YoY growth and is 4 pennies below consensus EPS of $1.51. Our $1.47 4Q21 estimate implies FY21 EPS of $6.20, which is at the low end of management’s expectation to deliver “at least” $6.20 in EPS and may ultimately prove conservative given PepsiCo’s (PEP) history of outperforming expectations. Since 1Q18, we can see that PEP’s reported EPS has come in above consensus in 14 out of the past 15 quarters, with an average upside surprise of+5%,” noted Vivien Azer, equity analyst at Cowen.

“As we are already almost a month into the new year, all eyes will be on PepsiCo’s (PEP) initial FY22 guidance. As a reminder, on the last earnings call management noted that at the time they expected FY22 performance to be in line with its stated long-term targets, which means MSD (+4-6%) organic revenue growth and HSD core constant currency EPS growth.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 10

TICKER COMPANY EPS FORECAST
AZN AstraZeneca $0.78
EXPE Expedia Group $-0.01
GDDY GoDaddy $0.41
K Kellogg $0.8
MCO Moody’s $2.3
PEP PepsiCo $1.52
TWTR Twitter $0.16
WU Western Union $0.53

 

Friday (February 11)

TICKER COMPANY EPS FORECAST
APO Apollo Global Management $1.08
D Dominion Energy $0.93
FTS Fortis $0.58
MGA Magna International $0.81

 

Disney Shows NFT Interest With Latest Job Vacancy

Almost every brand has an NFT plan in the background, and Disney has finally revealed its own. 

The media and entertainment company announced this with a job posting for a new business development manager. The hire would be in charge of the Digital Experiences team at the company.

Disney Wants to Hire NFT Expert

The job description posted on January 30 states that part of the role of business manager would be to lead Disney efforts in the NFT space. This will include monitoring the dynamic marketplace, determining strategy, and managing partners.

With more than about ten responsibilities, Disney is focused on getting an experienced hand. Its requirements include a minimum of 5 years of experience with licensing and/or business development. It also requires knowledge and passion for Digital and NFT categories.

This won’t be the first time talks about NFT will involve Disney, but this is the clearest the company has been about its intention. In a recent interview with New York Times, former Disney chairman Bob Iger dropped hints about the company’s move into NFT and Metaverse.

Disney’s Metaverse Efforts

As a media company, Disney is well-positioned to take advantage of the growing industry because it already has assets to help its drive. 

Recently, journalists uncovered a virtual world simulator patent for Disney. The United States Patent and Trademark Office (USPTO) approved the patent last December. 

This was after the CEO, Bob Chapek, said during its November earnings call that the company is ready for its own metaverse.

The media giant also has a partnership with NFT marketplace Veve. The partnership was for the Gochain based platform to promote Disney streaming service Disney+ using the “Golden Moments” collection of digital tokens.

All of these point to a strategic plan by a leading company to become a relevant force in the NFT space. But it’ll find lots of competition with other media brands like YouTube, Meta, and Netflix, also exploring similar ideas.

Furthermore, many companies like Nike, Mercedes Benz, Coca-Cola, and more have already entered the NFT space with their own collections, partnerships, and patents. 

Best Stocks, Crypto, and ETFs to Watch – Coca-Cola, Microsoft, Shiba Inu in Focus

First quarter earnings season starts this week, with Delta Air Lines Inc. (DAL) reporting in Thursday’s pre-market session. The stock closed at a two-month high on Friday, despite well-publicized Omicron-induced travel disruptions. Traders and investors are looking beyond the next month of soaring infections and into the summer travel season, in which massive herd immunity could finally put the COVID pandemic in the rear view mirror.

Dow component Coca-Cola Co. (KO) and other dividend payers have roared out of the gates in 2022, marking a widespread rotation into equities that can withstand high inflation. Barron’s magazine noted this trend over the weekend, highlighting Coke’s bullish outlook after sub-par 2020 and 2021 stock performance. Of course, these sleepy plays aren’t for everyone but a little exposure in a long-term portfolio goes a long way toward getting a good’s night sleep during market downdrafts.

2021’s top-performing tech stocks have been sold aggressively so far this year, highlighting a market tendency for one year’s big winners to become the next year’s big laggards. Dow component Microsoft Corp. (MSFT) could defy this trend, with strong cloud division growth expected to continue into 2023. Buying signals haven’t gone off yet for Mr. Softee but the pullback is slowly approaching support near 300 that could offer a low risk buying opportunity.

Shiba Inu (SHIB) has had a tough time since an oversold bounce ended at 0.00004000 on Christmas Eve, shedding more than 30% while breaking short-term support at 0.00002820. Bears could retain control for the next few weeks but there is a potential light at the end of the tunnel because the decline is approaching strong support at the 200-day moving average at 0.00002400, which has narrowly aligned with the .786 Fibonacci retracement of the September into October rally wave.

SPDR Select Sector Utilities ETF (XLU) posted the third highest ETF volume on Friday, bouncing at 69 after a 5-day pullback. The fund has spent the last month testing resistance at the February 2020 high at 71.10, with a breakout setting the stage for the strongest gains since 2019. Natural gas prices haven’t risen at the same rate as other fossil fuels and many of these companies generate power through water, nuclear, and other cheap energies, making them less vulnerable to rising commodity prices.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held Coca-Cola in a family account at the time of publication. 

2 Stocks From This Defensive Sector Buck The Trend During Market Selloff

After Federal Reserve meeting minutes pointed to a faster-than-expected rise in U.S. interest rates, the 4 major U.S. indices – S&P 500 (SPX), Nasdaq Composite (IXIC), Dow Jones (DJI) and Russell 2000 (RUT) fell significantly. The volatility similar to the Black Friday’s selloff last year is back.

Despite the market selloff, there are still a few dozen stocks showed up in my screener, which is under beta testing. After further filtering based on the price structure and the relative strength, one defensive sector stands out because there are still quite a number of stocks such as Coca-Cola (KO), General Mills (GIS), Tyson Food (TSN), Pepsico (PEP), etc… in a strong up trend and outperform the S&P 500.

Visit TradePrecise.com to get additional market insights and test results from my stock screener in email for free.

The following 2 stocks are selected based on the price volume analysis and could still provide decent reward to risk ratio with a relatively low risk trade entry. Consumer staples is one of the well-known defensive sectors and these 2 stocks are under the Food Products industry group.

Hershey Foods (HSY) Price Volume Analysis

From the weekly chart as shown below, HSY has formed an accumulation range lasted 18 months from September 2019 until March 2021. After breakout from the accumulation structure, HSY had a steady rally and a shallow pullback from July-November 2021.

Since December, HSY broke above the resistance at 180 and continued to trend up despite the increasing volatility showed up in the broad market.

It can be observed that the volume within the accumulation structure has been decreasing, suggested that the supply is exhausted, which is a classical volume pattern based on the Wyckoff method. If you would like to find out more on the application of Wyckoff method, watch the YouTube video to find out how I derive the directional bias for the current market.

On the daily chart below, HSY is on a climatic run with the presence of supply, which could be vulnerable for a pullback. Should a reversal happen near the axis line at 192 where the resistance-turned-support, that could provide a decent entry by leaning on the support level at 192.

Flowers Foods (FLO) Price Volume Analysis

FLO has started an accumulation range from September 2020-2021 (refer to the chart below). After the breakout in October 2021 followed by a shallow pullback tested the resistance-turned-support area at 24.5, the markup phase started. So far, FLO is travelling within an up-channel, forming a higher high and a higher low.

It is worth noting the two volume spikes as highlighted in yellow because those two bars containing increasing of supply, which essentially stopped the short term up move. After the spike of volume in the first bar in mid of November, a pullback took place and tested the demand line of the channel.

After an even higher spike of volume in the second bar in mid of December on the breakout, the pullback is mild and shallow with decreasing volume, suggested the supply showed up on the breakout bar has been absorbed.

In the latest 2 bars, there are presence of supply as reflected in the increasing volume together with the rejection tail and the smaller price spread, which could be vulnerable for a pullback. Watch out for a pullback or consolidation before the next rally. A reversal entry or a breakout entry is viable while leaning the support at 27.5.

As the bias for the short term direction of the market is down plus the deterioration of the market breadth, it is essential to monitor how the price of HSY and FLO reacts and wait for a confirmation before execution.

PepsiCo Should Post Solid 2022 Returns

PepsiCo Inc. (PEP) won the cola wars a long time ago, outperforming Dow component Coca-Cola Co. (KO) by a country mile. Ten year returns tell the tale, with PEP gaining an impressive 166% prior to dividends while KO has added just 77%. The company has outpaced its rival by an even greater margin since March 2020, benefiting from broad diversification into snacks while KO’s beverage-heavy lineup suffered from half-empty stadiums, restaurants, and movie theaters.

Managing Inflation Headwinds

Rising inflation has challenged the bottom lines of both operations but PepsiCo’s strong management has implemented effective cost cutting and productivity gain initiatives that are expected to produce a $1 billion in annual savings through 2023, despite less income from restaurants, theaters, and stadiums. This proactive approach includes improvements to the company’s global management footprint and the reengineering of its distribution network.

Argus analyst John Staszak raised PEP’s price target to $195 on Tuesday, noting “at 24.9-times our revised 2022 EPS estimate, the shares are trading in line with their five-year historical average. We think that investors will continue to favor the shares given the company’s ability to raise its dividend and deliver strong growth. Our revised target price of $195 (up from $180), combined with the dividend, implies a total potential return of about 15% from current levels”.

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Moderate Buy’ rating based upon 11 ‘Buy’, 1 ‘Overweight’, 9 ‘Hold’, 2 ‘Underweight’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $160 to a Street-high $195 while the stock is set to open Wednesday’s session about $3 above the median $173 target. Although this placement suggests PepsiCo is fairly valued at this time, the current rotation into dividend payers should benefit price action in the first quarter.

PepsiCo completed a breakout above the February 2020 peak at 147.20 in July 2021, entering a strong uptrend that stalled at a 7-year rising highs trendline in August. It cleared that resistance level in November and took off in another uptick about one month later, posting an all-time high at 174.45 on Tuesday. A pullback to new support near 165 should mark a low risk buying opportunity in this configuration, ahead of continued upside toward 200. The current 2.49% dividend yield makes this set-up even more attractive for longer-term strategies.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held PepsiCo and Coca-Cola in family accounts at the time of publication. 

Coca-Cola Makes Its Largest Acquisition After Completing the $5.6 Billion Bodyarmor Deal

Beverage company Coca-Cola has made its biggest acquisition in history, splashing $5.6 billion to acquire Bodyarmor.

Coca-Cola Acquires Bodyarmor

Coca-Cola announced earlier today that it had acquired sports drink maker Bodyarmor in a deal worth $5.6 billion. This latest development represents the biggest acquisition in Coca-Cola’s history as it looks to expand its base.

The acquisition started a while back. Coca-Cola first took control of 15% of Bodyarmor in 2018, becoming the company’s biggest shareholder at the time. Basketball legend Kobe Bryant was the biggest shareholder in Bodyarmor, and his estate is slated to receive $400 million from the company’s sale to Coca-Cola.

Coca-Cola’s acquisition of Bodyarmor doesn’t come as a surprise as the company admitted earlier this year that it is planning to take full control of the energy drink manufacturer. Coca-Cola even indicated its intentions in a pre-acquisition filing with the Federal Trade Commission.

By acquiring Bodyarmor, Coca-Cola looks to challenge Pepsi in the energy drink sector. Pepsi remains the market leader, with 70% control of the market. Bodyarmor will join Coca-Cola’s existing energy drink Powerade to battle PepsiCo for supremacy in the sector. Bodyarmor is currently the second-largest energy drink manufacturer in the United States and generated more than $1.4 billion last year.

Bodyarmor co-founder Mike Repole will continue to collaborate on the company’s still beverages portfolio. Repole has an excellent business partnership with Coke, with some of his other companies, including Vitaminwater, Smartwater and Energy Brands, all owned by Coca-Cola.

KO Down by Less Than 1% Despite Bodyarmor Acquisition

The shares of Coca-Cola (KO) are down by less than 1% since the US market opened despite the news of its Bodyarmor acquisition. At the time of writing, KO is trading at $56.30, down by 0.12% over the past few hours.

coke
KO stock chart. Source: FXEMPIRE

Year-to-date, KO hasn’t performed excellently. The stock price is up by only 5% since the start of 2021. The poor performance could be attributed to the Covid-19, which has forced many businesses, especially restaurants, cinemas and sporting institutions, to close their gates to customers.

Coca-Cola’s Shares Rally After The Company’s Earnings Top Estimates

The shares of Coca-Cola have been rallying since the US market opened thanks to the company’s earnings surpassing analysts’ estimates.

Coca-Cola’s Revenue Tops $10 Billion

Leading beverage manufacturer Coca-Cola reported its third-quarter earnings earlier today, and it has outperformed analysts’ expectations. The company’s revenue surpassed what Wall Street analysts had expected as the global economy recovers from the Coronavirus pandemic and more people return to work.

Coca-Cola’s earnings per share in the third quarter was 65 cents adjusted vs. 58 cents expected, while the revenue was $10.04 billion vs. $9.75 billion expected. The company’s net income for Q3 grew to $2.5 billion, or 57 cents per share. This is higher than the $1.7 billion, or 40 cents a share reported in Q3 2020.

Chairman and CEO of Coca-Cola James Quincey pointed out that the beverage company is slowly coming out of the pandemic, and its business is getting stronger. He added that Coca-Cola is gaining strength in its away-from-home channels, with the re-opening of restaurants and movie theaters boosting the company’s revenue.

The company’s net sales surged by 16% to $10.04 billion from $8.65 billion in the same quarter of last year. The earnings recorded in Q3 surpassed the analysts’ estimate of $9.75 billion. A huge chunk of Coca-Cola’s growth came from organic revenue, which went up by 14% in the last quarter. The organic revenue excludes the impacts of foreign currency, acquisitions and diversifications.

coca cola
KO stock chart. Source: FXEMPIRE

KO Up By 2% Since Market Opened

The shares of Coca-Cola have been rallying since the company reported its earnings during the early hours of today. Since the market opened today, KO is up by 2.19%, and it is trading at $55.68 per share.

The stock is starting to recover following poor performances last year due to the Coronavirus pandemic. Year-to-date, KO is up by nearly 4%, despite losing 2% of its value during the second quarter of 2021.

How Supply Issues could Influence SP500?

At the same time, many businesses continue to announce plans for further price increases, with most facing higher cost pressures. It will be interesting to see how or when the U.S. consumer starts to pull back.

Upcoming price increases

UPS yesterday was the latest to announce upcoming price increases, joining companies like Kimberley-Clark, Procter & Gamble, Nestlé, and Chipotle, to name just a few that are attempting to offset higher input costs. These moves reinforce the bears argument that inflation will prove to be longer-lasting than the Federal Reserve’s stance that the wave of higher prices is only “transitory.”

Judging from regional Federal Reserve Manufacturing Surveys that have been updated so far, challenges related to supply chain dislocations and labor shortages continue to contribute to the inflationary environment. Meaning manufactures are still struggling to expand output amid raw material shortages, higher input costs, transportation bottlenecks, and a lack of qualified workers. There have been minor improvements with the pace of cost increases easing a bit and respondent outlooks turning more positive.

It will take more than one month of slightly better data for investors to believe the worst of the supply chain mess is behind us, though.

Data to watch today

Economic data today includes advanced reads on Retail and Wholesale Inventories for October. Bulls are hoping inventories have managed to climb from depressed levels brought on by supply chain challenges, especially as we head into the holiday shopping season. Remember, if companies don’t have the products to sell it will be tough to meet earnings and growth forecasts.

Durable Goods Orders for September is also due today. Oil traders today are anxious to see the Energy Information Administration’s weekly oil inventory report after both Brent and WTI oil futures yesterday closed at their highest levels since 2014 when oil was trading close to $100 a barrel.

Investors this morning will also be digesting the Bank of Canada’s latest policy decision. Insiders are expecting the central bank to raise its inflation forecast and further cut its bond purchases. Another reduction will mark the fourth time in the past year that the Bank of Canada has “tapered” its asset purchases, something most other central banks have not yet begun. The Bank of Canada could also announce when it intends to begin interest rate hikes, with some analysts anticipating liftoff as soon as March due to rising inflation.

Such a move could increase fears that other global central banks, including the U.S. Fed, will feel pressured to act more aggressively to combat inflation. Meaning analysts could begin moving up timelines for when the Fed might end asset purchases and begin rate hikes, something that could weigh on bullish outlooks.

Earnings

It’s another busy day for earnings with highlights including BASF, Boeing, Bristol Myers Squibb, CME Group, Coca Cola, eBay, General Motors, Hilton Worldwide, Kraft Heinz, McDonald’s, Norfolk Southern, O’Reilly Automotive, Thermo Fisher, and Twilio. Alphabet (Google) and Microsoft announced after the market close yesterday with both blowing expectations out of the water.

Notably, Google’s advertising revenue, which rose +43%, didn’t appear to take any hits from changes made to Apple’s privacy policies, something cited by both Facebook and Snap. Both Google and Microsoft also saw continued robust growth in their cloud divisions with revenue climbing +45% and +31% respectively. Apple and Amazon will wrap up the the last of the so-called FAAMG stock earnings when they report tomorrow. Stay tuned…

Big Tech Pushing S&P 500… But How Does it End? Amazon, Apple, Facebook, Google, Microsoft and Tesla now make up 24% of the S&P 500. It seems like how they go so goes the overall stock market. Keep in mind, “Big Tech” now makes up about 40% of the entire S&P 500. If the trade finds Big Tech to be overvalued or in some type of bubble the market could take a sizable hit as it deflates.

PepsiCo to Sell Tropicana, Other Juice Brands For $3.3 Billion

The company, which bought the orange juice maker in 1998 for roughly $3.3 billion and U.S.-based Naked Juice nearly a decade later for $150 million, will keep a 39% stake in the new joint venture and have exclusive U.S. distribution rights for the brands.

The sale will give PepsiCo the funds to develop and grow its portfolio of health-focused snacks and zero-calorie beverages, Chief Executive Officer Ramon Laguarta said, as the company focuses on more profitable brands.

Rival Coca-Cola Co has also been streamlining its product range over the past year, discontinuing its TaB diet soda and Coca-Cola Energy brands in the United States and selling its ZICO coconut water brand.

“Companies are finding it difficult to provide effective marketing support behind an infinite number of brands that often compete for very similar occasions,” Rabobank Food and Beverage analyst Stephen Rannekleiv said in May.

He added that companies are looking to launch new products that have been developed in-house.

The juice businesses made about $3 billion in net revenue in 2020 for PepsiCo, with operating profit margins that were below the group’s.

The deal is one of the many food and beverage investments PAI has made over the last few years. In 2019, Nestle SA sold its U.S. ice cream business, including brands such as Häagen-Dazs, to a joint venture backed by PAI in deal valued at $4 billion.

Centerview Partners is the financial advisor to PepsiCo on the deal, while J.P. Morgan Securities LLC is advising PAI.

(Reporting by Uday Sampath in Bengaluru; Editing by Patrick Graham and Arun Koyyur)

Coca-Cola Tops Q2 Earnings Estimates, Raises Full-Year Guidance

Coca-Cola, the world’s largest soft drink manufacturer, reported better-than-expected earnings and revenue in the second quarter, largely driven by a recovery in markets where coronavirus-related uncertainty has abated, sending its shares up over 1% on Wednesday.

The most popular and biggest-selling soft drink reported earnings per share of $0.68, beating analysts’ expectations of $0.56. The company said its net revenue surged over 41% to $10.13 billion, beating the Wall Street consensus estimates of $9.32 billion.

Coca-Cola said it expected to deliver organic revenue (non-GAAP) growth of 12% to 14% and comparable net revenues (non-GAAP) to grow in the range of 1% to 2% in the full year 2021. The company also expects to deliver comparable EPS (non-GAAP) growth of 13% to 15% versus $1.95 in 2020.

Following the upbeat results, Coca-Cola shares 1.28% to $56.55 on Wednesday. The stock rose over 3% so far this year.

Analyst Comments

“Short term, we see a well-above-consensus post-COVID-19 topline/EPS recovery ahead through 2022, and longer-term, see a return to pre-COVID-19 outsized sales growth vs. peers, improved execution with a reorganization, and higher margins with productivity/rational industry environment,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“We are Overweight Coca-Cola (KO) after significant stock underperformance given COVID-19 impacts on KO’s on-premise eating / drinking out business (~40% of sales) and gas & convenience (~10%) with gov’t mandated restaurant closures and reduced foot traffic. COVID-19 impacts drove a large -9% organic sales decline in 2020, but we forecast a recovery to ~14.5% organic growth in 2021 and ~8% in 2022 with a post-COVID-19 recovery in away-from-home. We believe Coke’s LT topline growth outlook is above peers, with strong pricing power, and favorable strategy tweaks under Coke’s CEO, including increased innovation and a cultural shift towards a total beverage company.”

Coca-Cola Stock Price Forecast

Ten analysts who offered stock ratings for Coca-Cola in the last three months forecast the average price in 12 months of $61.20 with a high forecast of $64.00 and a low forecast of $58.00.

The average price target represents an 8.22% change from the last price of $56.55. From those ten analysts, six rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $65 with a high of $75 under a bull scenario and $40 under the worst-case scenario. The firm gave an “Overweight” rating on the soft drink company’s stock.

Several other analysts have also updated their stock outlook. Cowen and company raised the target price to $60 from $57. JPMorgan lifted the target price to $59 from $56. Jefferies increased the target price to $59 from $57. Guggenheim raised the target price to $59 from $56.

“Our FY21-23 EPS ests are little changed (we raised our forecast into KO’s 2Q print) and maintain our Hold post KO’s strong 2Q. The recovery in AFH channels, continued resilience in AH channels (notably in DMs + for new occasions), improved market share, and commitment to restoring A&M are all encouraging. We like the strategic direction; however, expectations appear reasonable, and we see less scope for shares to re-rate higher at ~25x P/E. Hold, $60 price target,” noted Kevin Grundy, equity analyst at Jefferies.

Check out FX Empire’s earnings calendar

No Direct Impact On Sales from Ronaldo Snub -Coca-Cola CFO

By Uday Sampath Kumar

Ronaldo, a health fanatic with an aversion to carbonated drinks, snubbed the brand by holding a bottle of water and saying “agua”, Portuguese and Spanish for water. His action sent the internet into a frenzy and briefly wiped off billions of dollars from the company’s market capitalization.

“You have to take the long view on these partnerships. You’re always going to have some events that don’t necessarily go your way and we just deal with them and manage them as such,” Coca-Cola Chief Financial Officer John Murphy said in an interview.

“Our commitment to these major tournaments has not been affected,” Murphy added.

The soda maker raised its full-year sales and profit forecasts on Wednesday, as demand bounces back from pandemic lows for its beverages following the re-opening of theaters, restaurants and stadiums.

(Reporting by Uday Sampath and Praveen Paramasivam in Bengaluru; Editing by Anil D’Silva)

Earnings vs Inflation – What Is The Right Bet?

As investment money will always be looking for a place to roost many stocks still look like the best opportunity for alpha, especially some of your bigger high-tech companies like Microsoft, Google, Facebook, etc… who don’t face the same headwinds created by supply chain dislocations, higher commodity prices, etc.

Fundamental analysis

Bulls are hoping to see more money lured into the market by strong Q2 earnings which have so far failed to ignite a meaningful rally. Analyst expectations for S&P 500 company earnings is still around +65%, something stock bears argue is lofty considering the extreme level of supply chain dislocations and labor shortages.

There is also a lot of debate about whether corporate profit gains are “peaking” in the face of slower growth in the quarters ahead as the reopening boom begins to fade. Remember, investors place bets on the future, not what happened last quarter.

The earnings pace really picks up next week with highlights including IBM on Monday; Chipotle and Netflix on Tuesday; ASML, CocaCola, Novartis, and Verizon on Wednesday; Abbott Labs, AT&T, Biogen, Capital One, Dow Inc., Intel, Snap, Southwest Airlines, Twitter, and Union Pacific on Thursday; and American Express, Honeywell, and Nextera on Friday.

Inflation

One of the biggest factors that seem to be weighing on investor sentiment continues to be inflation. The latest indication of rising costs was reflected last week in U.S. Import Prices, which climbed for an eighth straight month in June.

However, the year-on-year increase slid to +11.2%, down from +11.6% in May is an encouraging sign that some inflationary pressures might be starting to ease. Federal Reserve Chairman Jerome Powell, testifying before the Senate Banking Committee yesterday, repeated the script he’s stuck with for months, saying inflation will likely remain elevated in the coming weeks and months before moderating.

Powell also told lawmakers that the Fed is not in a hurry to start paring its monthly asset purchases but he stressed that the central bank is prepared to adjust policy if they see signs of inflation moving “materially and persistently beyond levels consistent with our goal.” Wall Street increasingly expects the Fed to start trimming asset purchases later this year and even start lifting rates as soon as Q4 2022.

The Fed meets next on July 27-28 but most analysts think Powell will wait to make any big policy change announcements at either the annual Jackson Hole symposium at the end of August or possibly the FOMC’s September policy meeting. Central banks in Canada and New Zealand this week scaled back their asset purchase schemes which some worry could start to put pressure on central bankers in other developed countries to also tighten.

The European Central Bank releases its latest policy decision next Thursday. Bulls still largely believe that U.S. growth will be able to outpace “transitory” inflation pressures but the outlook for some companies could dim if the Fed starts reining in its “easy money” policies sooner than investors have been anticipating.

sp500 analysis forecast 18 july 2020

SP500 technical analysis

SP500 pulled back last week after another attempt to break out. There is no surprise we see such choppiness in the middle of summer. Moreover, very likely this price activity will stay for a few more weeks. We are still in a bull market. However, the risk of deep pullback is rising. If that happens, SP500 will target to close the gap near 4000.

On the other hand, if the price sustains above Gann resistance 4400, bulls will target 4500 at least. Two of my favourite indicators are giving opposite signals now. So, I don’t have any strong bias at the moment. Advance Decline Line remains bearish. At the same time, Insider Accumulation is bullish. In general, swing traders have to focus on daily support and resistance. Likely it will take few more weeks to see a real direction. Short-term traders can use Gann levels and Cycles on 4h charts to find trading opportunities.

Earnings to Watch Next Week: IBM, Netflix, Coca-Cola, Twitter, Intel and American Express in Focus

Earnings Calendar For The Week Of July 19

Monday (July 19)

IN THE SPOTLIGHT: IBM

The Armonk, New York-based technology company is expected to report its second-quarter earnings of $2.32 per share, which represents year-over-year growth of over 6% from $2.18 per share seen in the same quarter a year ago.

The world’s largest computer firm would post revenue growth of about 1% to $18.24 billion. In the last four consecutive quarters, on average, the company has delivered earnings of over 5%.

The better-than-expected results, which will be announced on Monday, July 19, would help the stock recover its last year’s losses. IBM shares rose about 12% so far this year.

“We expect IBM to marginally beat the consensus estimates for revenues and earnings. The company has reported better than expected earnings figures in each of the last four quarters while revenue beat consensus in three of the last four quarters,” noted analysts at Trefis.

“In the past year the company has increased its investment in R&D and capex and since October has acquired seven companies focused on hybrid cloud and AI. As the pace of vaccination increases and countries are opening up, we expect the momentum to continue in the second-quarter FY2021 results as well. Our forecast indicates that IBM’s valuation is around $140 per share, which is in line with the current market price of $140.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 19

Ticker Company EPS Forecast
TSCO Tractor Supply $2.97
PPG PPG Industries $2.20
JBHT J B Hunt Transport Services $1.57
CCK Crown $1.78
STLD Steel Dynamics $3.38
PACW Pacwest Bancorp $0.99
WTFC Wintrust Financial $1.59
FNB FNB $0.28
SFBS ServisFirst Bancshares $0.93
IBM IBM $2.32
PLD ProLogis $0.45
ACI AltaGas Canada $0.68
ZION Zions Bancorporation $1.29
NVR NVR $72.35
ELS Equity Lifestyle Properties $0.28
AN AutoNation $2.67

Tuesday (July 20)

IN THE SPOTLIGHT: NETFLIX, UNITED AIRLINES HOLDINGS

NETFLIX: The California-based global internet entertainment service company is expected to report its second-quarter earnings of $3.18 per share, which represents year-over-year growth of 100% from $1.59 per share seen in the same quarter a year ago.

The streaming video pioneer would post revenue growth of about 19% to around $7.3 billion. In the last four consecutive quarters, on average, the company has delivered earnings of over 5%.

“Areopening consumer and the lingering effects of 2020’s production delays suggest risk to consensus 2Q/3Q estimates. However, more content is on the way, supporting an increase in net additions in 4Q21/’22. In this cross-asset report, we reiterate OW on shares and reiterate our recommendation to buy 10Y bonds in credit,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“We believe share performance is highly dependent on increasing global membership scale. Proven success in the US and initial international markets provides a roadmap to success in emerging markets, and scale should allow NFLX to leverage content investments and drive margins. Higher global broadband penetration should increase the NFLX addressable market, driving member growth and providing further opportunity given NFLX’s global presence. Longer-term, we see the ability to drive ARPU growth, particularly given increased original programming traction.”

UNITED AIRLINES HOLDINGS: One of the largest airlines in the world is expected to report a loss for the sixth consecutive time of $4.21 in the second quarter of 2021 on July 20 as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and renewed travel restrictions.

However, that would represent a year-over-year improvement of about 55% from -$9.31 per share seen in the same quarter a year ago.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 20

Ticker Company EPS Forecast
DOV Dover $1.82
OMC Omnicom $1.38
SBNY Signature Bank $3.14
PM Philip Morris International $1.54
HCA HCA $3.16
SYF Synchrony Financial $1.38
KEY KEY $0.54
ALLY Ally Financial $1.50
MAN ManpowerGroup $1.41
GATX GATX Corp $1.03
BMI Badger Meter $0.46
ONB Old National Bancorp $0.40
FMBI First Midwest Bancorp $0.38
NFLX Netflix $3.18
CNI Canadian National Railway USA $1.49
CMG Chipotle Mexican Grill $6.50
IBKR Interactive Brokers $1.03
UAL United Airlines Holdings -$4.21
PNFP Pinnacle Financial Partners $1.44
RXN Rexnord $0.50
UCBI United Community Banks $0.62
SNBR Scs Group Plc $1.07
FULT Fulton Financial $0.33
RUSHA Rush Enterprises $0.79
ISRG Intuitive Surgical $3.07
UBS UBS Group $0.42
TRV Travelers Companies $2.38
HAL Halliburton $0.22
CFG Citizens Financial $1.10
SNV Synovus Financial $1.03
IRDM Iridium Communications -$0.06
NEOG Neogen $0.14
EXPO Exponent $0.42
RNST Renasant $0.77

Wednesday (July 21)

IN THE SPOTLIGHT: COCA-COLA

The world’s largest soft drink manufacturer is expected to report its second-quarter earnings of $0.56 per share, which represents year-over-year growth of over 30% from $0.42 per share seen in the same quarter a year ago. The company’s revenue would grow over 30% to $9.4 billion.

“We are Overweight Coca-Cola (KO) after significant stock underperformance given COVID impacts on KO’s on-premise eating / drinking out business (~40% of sales) and gas & convenience (~10%) with gov’t mandated restaurant closures and reduced foot traffic. COVID impacts drove a large -9% organic sales decline in 2020, but we forecast a recovery to ~8% organic growth in 2021/2022 with a post-COVID recovery in away-from-home,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“We believe Coke’s LT topline growth outlook is above peers, with strong pricing power, and favorable strategy tweaks under Coke’s CEO, including increased innovation and a cultural shift towards a total beverage company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 21

Ticker Company EPS Forecast
JNJ Johnson & Johnson $2.29
ASML ASML $2.98
KO Coca-Cola $0.56
ANTM Anthem $6.34
NDAQ Nasdaq Omx $1.72
RCI Rogers Communications USA $0.62
NTRS Northern $1.71
BKR Baker Hughes Co $0.16
MTB M&T Bank $3.65
MKTX MarketAxess $1.72
LAD Lithia Motors $6.01
HOG Harley Davidson $1.21
BOKF BOK Financial $1.83
STX Seagate Technology $1.84
KNX Knight Transportation $0.88
CCI Crown Castle International $0.68
CSX CSX $0.37
DFS Discover Financial Services $4.01
EFX Equifax $1.71
GL Globe Life Inc $1.83
LVS Las Vegas Sands -$0.15
SEIC SEI Investments $0.91
WHR Whirlpool $5.95
GGG Graco $0.61
REXR Rexford Industrial Realty $0.09
OMF OneMain Holdings $2.12
THC Tenet Healthcare $1.07
FR First Industrial Realty $0.22
SLM SLM $0.37
LSTR Landstar System $2.33
SLG SL Green Realty $0.17
VMI Valmont Industries $2.50
RLI RLI $0.75
UFPI Universal Forest Products $1.56
STL Sterling Bancorp $0.50
UMPQ Umpqua $0.45
FTI FMC Technologies -$0.01
CNS Cohen & Steers $0.82
MC Moelis & Company $0.83
TCBI Texas Capital Bancshares $1.24
BXS BancorpSouth $0.67
PLXS Plexus $0.91
NVS Novartis $1.54
SAP SAP $1.44
TXN Texas Instruments $1.83
EBAY eBay $0.95
KMI Kinder Morgan $0.19
URI United Rentals $4.90
IPG Interpublic Of Companies $0.43
FNF Fidelity National Financial $1.41
CMA Comerica $1.60
MTG MGIC Investment $0.42
FCFS FirstCash $0.60
CVBF CVB Financial $0.35
PTC PTC $0.63
PPERY PT Bank Mandiri Persero TBK $0.18

Thursday (July 22)

IN THE SPOTLIGHT: TWITTER, INTEL

TWITTER: The online social media company that enables users to send and read short 140-character messages called “tweets”, is expected to report its second-quarter earnings of $0.07 per share, which represents year-over-year growth of over 105% from a loss of -$0.16 per share seen in the same quarter a year ago.

The San Francisco, California-based company would post revenue growth of about 55% to $1.06 billion.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for TWTR given 1) continued turnaround progress and 2) platform scarcity,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

INTEL: The California-based multinational corporation and technology company is expected to report its second-quarter earnings of $1.07 per share, which represents a year-over-year decline of about 14% from $1.23 per share seen in the same quarter a year ago. The company’s revenue would fall over 10% to $17.73 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 22

Ticker Company EPS Forecast
ULVR Unilever £1.29
PSON Pearson £8.40
ABB ABB $0.36
CBSH Commerce Bancshares $1.02
DOW Dow Chemical $2.36
DHR Danaher $2.05
FITB Fifth Third Bancorp $0.81
FAF First American Financial $1.70
RS Reliance Steel & Aluminum $4.73
T AT&T $0.79
WBS Webster Financial $0.99
UNP Union Pacific $2.54
BKU BankUnited $0.86
SNA Snap-On $3.21
ABT Abbott $1.02
NEM Newmont Mining $0.81
MMC Marsh & McLennan Companies $1.42
BIIB Biogen $4.60
TRN Trinity Industries $0.09
DGX Quest Diagnostics $2.86
ALLE Allegion $1.30
CLF Cliffs Natural Resources $1.52
TPH Tri Pointe Homes $0.81
VLY Valley National Bancorp $0.29
EWBC East West Bancorp $1.39
DHI DR Horton $2.82
SON Sonoco Products $0.86
POOL Pool $5.49
WSO Watsco $3.01
SAFE 3 Sixty Risk $0.33
CSL Carlisle Companies $2.22
WRB W.R. Berkley $0.98
SAM Boston Beer $6.69
SIVB SVB Financial $6.42
CE Celanese $4.34
RNR Renaissancere $4.62
TWTR Twitter $0.07
INTC Intel $1.07
WSFS Wsfs Financial $0.90
GBCI Glacier Bancorp $0.72
ABCB Ameris Bancorp $1.20
OZK Bank Ozk $0.92
ASB Associated Banc $0.47
FFBC First Financial Bancorp $0.52
VICR Vicor $0.33
VRSN Verisign $1.36
COF Capital One Financial $4.57
INDB Independent Bank $1.08
ASR Grupo Aeroportuario Del Sureste $36.49
SKX Skechers USA $0.51
RHI Robert Half International $1.05
FE FirstEnergy $0.57
SNAP Snap -$0.18
AEP American Electric Power $1.12
LUV Southwest Airlines -$0.27
AAL American Airlines -$2.12
DPZ Dominos Pizza $2.86
ALK Alaska Air -$0.62
NUE Nucor $4.76
BX Blackstone $0.78
FCX Freeport-McMoran $0.75
SASR Sandy Spring Bancorp $1.20
GPC Genuine Parts $1.52
ORI Old Republic International $0.53
HTH Hilltop $1.03
CROX Crocs $1.54
BCO Brinks $0.98
FFIN First Financial Bankshares $0.38
CNA Centrica £1.80

Friday (July 23)

Ticker Company EPS Forecast
HON Honeywell International $1.94
SLB Schlumberger $0.26
AXP American Express $1.63
KMB Kimberly Clark $1.74
NEP Nextera Energy Partners $0.61
ROP Roper Industries $3.67
RF Regions Financial $0.53
NEE NextEra Energy $0.69
AIMC Altra Industrial Motion $0.81
GNTX Gentex $0.44
FBP First Bancorp FBP $0.22
VTR Ventas -$0.08
GT Goodyear Tire & Rubber $0.16
ACKAY Arcelik ADR $0.48
MGLN Magellan Health $0.60
SXT Sensient Technologies $0.78

 

Stocks, Yields Slip as Investors Await Next Catalyst

The number of Americans filing new claims for unemployment benefits fell to a 16-month low last week as the U.S. labor market steadily gains traction while other data showed import prices rose solidly in June but have probably peaked.

Wall Street traded lower even as the four largest U.S. consumer banks posted blockbuster second-quarter results earlier this week that were above analysts’ estimates.

Investors are looking for visibility into future earnings as stocks have already surged in anticipation of stellar growth.

“We had the rally going into the earnings season. Now that we’re actually here, we’re seeing some softness. I wouldn’t be surprised if we don’t see a lot of strength during this reporting season,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

Analysts expect strong earnings, with IBES data from Refinitiv showing consensus looking for a 65.8% gain from a year ago, making corporate guidance more important than results.

‘NAME OF THE GAME’

Energy and technology stocks led the decline on Wall Street, with defensive consumer staples and utilities the only two of 11 S&P 500 sectors to gain. Staples have pricing power that could help Procter & Gamble Co, Coca-Cola Co and others rise, once it is clear their margins remain intact, said Tom Hayes, founder and managing member of Great Hill Capital LLC.

“Guidance is the name of the game. A lot of good news is already baked into the market and even with strong guidance, you may get a breather here,” Hayes said.

The MSCI world equity index, which tracks shares in 50 countries, closed down 0.33% to 723.66 after touching a record high on Wednesday. Europe’s broad FTSEurofirst 300 index closed down 0.92% at 1,761.30, less than 20 points from an all-time peak set Monday.

Losses in Europe were broad-based, with economically sensitive stocks such as banks, automakers and travel down between 0.3% and 1.6% as investors grew wary of rising COVID-19 cases and their potential economic impact.

Official data showed that the United Kingdom reported the highest daily increase in COVID-19 cases since Jan. 15.

On Wall Street, the Dow Jones Industrial Average eked out a 0.15% gain but the S&P 500 fell 0.33% and the Nasdaq Composite slid 0.70%.

Shares in emerging markets rose, bucking the global trend, with MSCI’s index gaining 0.77%.

The 10-year Treasury note fell 5.9 basis points to yield 1.2972%, while the dollar index, which tracks a basket of six currencies, rose 0.19% to 92.586.

The rally in U.S. and European bond prices, which show the inverse of yields, suggested growing investor caution.

The dollar has climbed in recent weeks as investors take stock of the Fed’s increasingly upbeat assessment of the U.S. economy, which for some investors has brought forward the timeframe for its next rate rise. Rates have fallen on Japanese buying and investors selling long-dated maturities for shorter-duration government debt, which has pushed prices up.

The euro fell 0.21% at $1.1810, while the yen traded slid 0.18% at $109.7900.

Oil prices fell as investors braced for increased supplies after a compromise agreement between leading OPEC producers and after a surprisingly low weekly reading on U.S. fuel demand.

Brent crude fell $1.29 to settle at $73.47 a barrel, while U.S. crude slid $1.48 to $71.65 a barrel.

Gold hit a one-month peak, spurred by Federal Reserve Chair Jerome Powell’s dovish comments that squashed market interest rates.

U.S. gold futures gained 0.3% to $1,830.00 an ounce.

COVID-19 VARIANT FEARS

China’s economic data showed average growth surpassed the first quarter, while June retail sales and industrial output beat expectations. But it also showed authorities, which only last week injected 1 trillion yuan into the financial system, will ensure that conditions stay loose.

The World Health Organization (WHO) COVID-19 dashboard reported the first weekly rise in global deaths from the virus in 10 weeks and a 5.6% jump in daily case numbers on Wednesday.

“The market is fearing the Delta variant could take a hold of different economies so you are almost seeing that we are back to the ‘bond yields lower, tech doing well’ scenario,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.

The likes of Amazon and Google are up 6-8% this month, while China’s biggest tech firms Alibaba and Tencent have surged more than 12% since China’s central bank made a supportive policy tweak for the first time in nearly a year on Friday.

The Chinese yuan dipped to 6.4628 per dollar in Asia after hitting a three-week high of 6.4508 overnight.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Sujata Rao; Editing by Will Dunham, Alex Richardson, Barbara Lewis and Gareth Jones)

Coca-Cola Perfectly Positioned for Breakout

Dow component Coca-Cola Co. (KO) is trading lower with U.S. stocks on Tuesday morning but looks are deceiving because the beverage icon is perfectly positioned to complete a rally into 2020’s all-time high and enter a strong uptrend. Seasonality is lending a hand in the uptick, with dividend plays often attracting buying interest in the second and third quarters, as investors sell first half winners and park profits until new opportunities arise.

Pandemic Pummeling

Revenues got battered through most of 2020, with lucrative sports franchises and stadium deals gathering dust due to pandemic shutdowns. Restaurant closures also compounded losses, along with an overly-narrow product line, at least compared to rival PepsiCo Inc. (PEP). The venerable Coke machine even took a hit because thirsty customers were reluctant to hold physical coins and bills or touch potentially-infectious plastic surfaces.

The current downturn in world markets should add to upside in coming months, with growing worries about inflation and over-valuation triggering a flight to safety. However, we can’t rule out the adverse impact of surging agricultural prices, which could undermine profit margins in coming quarters. Even so, it could be a blessing in disguise because targeted price increases have the power to overcome those headwinds and add to the bottom line.

Wall Street and Technical Outlook

Wall Street is getting the message, lifting consensus to a ‘Moderate Buy’ and $60 target. CEO James Quincy supported that bullish analysis in an interview last month, stating the company will exceed guidance if the second quarter strength matches Q1 results. However, he admitted that cost pressures could have an impact as economies reopen and demand rises but said the company will “manage price increases” to maintain profitability.

Coca-Cola completed a round trip into the 1998 high in the 40s in 2013 and entered a multiyear test, finally clearing resistance in 2019. It failed the breakout after posting an all-time high at 60.13 in February 2020, dropping 40% in just five weeks. A slow motion recovery wave reached major Fibonacci resistance in December, yielding a pullback, followed by a bounce that’s now testing that harmonic barrier.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Coca-Cola Tops Earnings Estimates; Target Price $58

The world’s largest soft drink manufacturer Coca-Cola reported better-than-expected earnings and revenue in the first quarter, largely driven by a recovery in markets where coronavirus-related uncertainty has abated, sending its shares up about 1% in pre-market trading on Monday.

The most popular and biggest-selling soft drink reported earnings per share of $0.55, beating analysts’ expectations of $0.50. The company said its net revenue rose about 5% to $9.02 billion, rising for the first time in the last four quarters, also beating Wall Street consensus estimates of $8.6 billion.

Following this, Coca-Cola shares rose about 1% to $54.08 in pre-market trading on Monday.

Analyst Comments

“Net, we’d expect a positive stock reaction to much better than expected top-line results in Q1 with 6% organic sales growth, well above the flat consensus (both of which included extra days), or +1% y-o-y underlying ex extra days, which confirms our viewpoint – even sooner than we expected – that Coke’s top line is poised to rebound above consensus,” said Dara Mohsenian, equity analyst at Morgan Stanley.

“We remind investors that consensus only assumes a 29% 2021/22 top-line recovery of the estimated lost $ organic sales in 2020 due to COVID-19, which seems way too low and is far below COVID-19 impacted peers at more like 75%.”

Coca-Cola Stock Price Forecast

Five analysts who offered stock ratings for Coca-Cola in the last three months forecast the average price in 12 months of $58.50 with a high forecast of $62.00 and a low forecast of $56.00.

The average price target represents an 8.98% increase from the last price of $53.68. Of those five analysts, three rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $60 with a high of $73 under a bull scenario and $38 under the worst-case scenario. The firm gave an “Overweight” rating on the soft drink company’s stock.

Several other analysts have also updated their stock outlook. Jefferies raised the target price to $56 from $53. RBC upped to outperform from sector perform and lifted the target price to $60 from $55. HSBC increased the target price to $60 from $58. Guggenheim upped target price to $54 from $53.

Upside and Downside Risks

Risks to Upside: Quicker than expected post-COVID-19 recovery, KO wins tax appeal, favorable FX, greater price/mix, higher productivity/cost savings, and marketing efficiency -highlighted by Morgan Stanley.

Risks to Downside: Unfavourable resolution of a tax dispute with the IRS, negative FX movements, prolonged impact of COVID-19 on consumer behavior, emerging markets macro volatility, health & wellness pressures, lower than expected productivity, and sugar taxes.

Check out FX Empire’s earnings calendar