In a research note to investors, Wells Fargo analyst Bonnie Herzog upgraded Coca-Cola (KO) to Outperform ahead of the company’s investor day meeting on November 16. The analyst argued that the market is underestimating “several key points” and that Coca-Cola should be “a core holding” in 2018 and beyond.
BUY COCA-COLA: Wells Fargo’s Herzog upgraded Coca-Cola to Outperform from Market Perform and raised her price target on the shares to $51 from $45, while saying that the shares should be “a core holding” in 2018 and beyond. The analyst told investors that Coca-Cola’s positive momentum should continue to accelerate, and noted that the market seems to be underestimating “several key points” which the company is likely to highlight at its meeting later this week. These include accelerating top-line growth trends, margin expansion opportunities in next three years and faster earnings growth, Herzog contended. She believes Coca-Cola’s accelerated growth will be driven by sustained positive momentum in North America, improving trends in many emerging markets, a strong innovation engine, a strengthened portfolio driven by its total beverage approach, and further cost savings. Noting that the company may support 5%-6% organic revenue growth over the next several years, Herzog told investors that she expects positive earnings revisions in the near future, and that she continues to believe Coca-Cola’s best-in-class distribution and strong brand portfolio will allow it to retain its premium valuation. Meanwhile, investments in productivity and marketing will pay off in years to come, particularly in outer years once refranchising is complete, she added.
PRICE ACTION: In morning trading, shares of Coca-Cola is fractionally up to $46.74. “Before the Move” is The Fly’s recurring series of exclusive stories that identify potentially market moving events, along with analyst predictions, ahead of the news.
