Companies and Brands

As Dow Rallies, Coca-Cola Is Left Behind

Douglas A. McIntyre

Published: February 16, 2019 8:25 am

Last Updated: January 31, 2020 12:32 am

The Dow Jones industrial average has rallied out of a sell-off late last year and is up 11% since the start of 2019. While many Dow stocks are up by double-digit percentages for the year, Coca-Cola Co. (NYSE: KO) is down 5%.

Most of the damage was done to Coke’s stock during the past few days. Shares collapsed over 8% on February 14, just after the company posted its most recent earnings. As is sometimes the case with stocks crushed after they report, Coke announced that it had met expectations. However, as it looked forward, its view was well below what Wall Street had expected.

Management characterized earnings as “Strong Results for Fourth Quarter and Full Year 2018.” It was a reasonable position. But Coke was shrinking, management said. “Net revenues declined 6% to $7.1 billion for the quarter and declined 10% to $31.9 billion for the year.”

For the full year 2019, management forecast:

Approximately 4% growth in organic revenues (non-GAAP)

12% to 13% growth in comparable currency neutral net revenues (non-GAAP) including an 8% to 9% tailwind from acquisitions, divestitures and structural items

Comparable net revenues (non-GAAP): 3% to 4% currency headwind based on the current rates and including the impact of hedged positions

Barron’s offered a summary of Wall Street’s reaction:

Coca-Cola stock fell hard on Thursday morning as investors soured on the soft-drink giant’s outlook for 2019, erasing the stock’s gains to start the year.

Shares of Coca-Cola were down 6.7% to $46.40 as major U.S. indexes fell, leaving the stock in negative territory in 2019, after the company reported fourth-quarter and full-year financial results Wednesday evening.

Fourth-quarter earnings per share beat Wall Street’s consensus expectations, and revenue came in a bit higher than expected. Yet that wasn’t enough to keep the stock, which had risen some 6% since the end of 2019, moving upward.

It is unlikely the stock price will rise anytime soon. At least until Coke has something more positive to tell investors.

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