Coca-Cola Co (#Coca-Cola) and PepsiCo, Inc. (#Pepsi), two of the all-time giants in cola beverages, are scheduled to report their results for the quarter ending December 2021 on Thursday, February 10 before the market opens.
#Coca-Cola is the largest beverage producer and distributor in the US, with a market cap of $266 billion. The return per share (EPS) for the quarter ended December 2021 is expected to be the lowest since Q1 2018, with Zacks forecasting $0.4 per share, down from the same period last year. Last year’s $0.47 reflected a yearly decline of -14.89%, while the same industry grew 44.49% and the S&P 500 grew 44.05%, as did sales forecasts. That, although slightly higher than the prior-year period at $8.9 billion versus $8.61 billion, is lower than the prior quarterly levels of 2021 from $10 billion, $10.1 billion and $9 billion, respectively. In the past the company has consistently performed better than expected. In particular, the last five quarters exceeded expectations by more than 10%.
An interesting move during Coca-Cola’s fourth quarter was the acquisition of the remaining 70% of BodyArmor ($5.6 billion) in November. BodyArmor, a low-calorie sports drink brand for athletes, was acquired by Coca-Cola for a 30% percent stake in 2018. BodyArmor is a major competitor to Pepsi-owned Gatorade.
#Coca-Cola Technical Analysis
As a consumer product, #Coca-Cola’s share price has performed well during the coronavirus outbreak compared to other industry stocks. The share price this week still holds at the all-time high above 61.00 ahead of the fourth quarter earnings report, and will likely continue to do so if the result exceeds market expectations. There will be the next resistance at the Fibo 161.8 level at 63.00. Conversely, if the result is lower than what the market expects, there will be key support in the year’s low zone and the 50-DMA line at 58.50.
#Pepsi, the giant behind beverages Coca-Cola and food segment Nestle, has a market cap of $237.6 billion. Zacks expects a fourth-quarter return per share of $237.6 billion. It was up $1.52 year-on-year quarterly versus $1.47, but below $1.79 for Q3 2021, reflecting a 3.4% annualized return per share, while sales are expected to rise at $24.32 billion, up from $22.46 billion in the prior-year period and $20.18 billion the previous quarter.
With different products lines which include several hundred brands and strong supply chain and digital capabilities creating a competitive advantage, Pepsi generates over $1 billion in revenue each year. This type of income generation means huge profits that will go back into the investors’ pockets. However, the impact of long supply chain disruptions, followed by price pressure both in terms of labor costs and transportation, are expected to affect Pepsi’s earnings as well as Coca-Cola’s.
#Pepsi Technical Analysis
#Pepsi’s share price has dropped from last week’s all-time high from 176.50 to the key support zone at 171.00, the confluence of the 50-day SMA and the 38.2 Fibo level. If the earnings report comes out better than expected, prices may rebound to test the original high 176.50 again, there will be the next resistance at the Fibo 161.8 level at 183.00, and we may see another test of the year’s 167.25 low zone.
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Chayut Vachirathanakit
Market Analyst – HF Educational Office – Thailand
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