Date: 15 Feb 2019

Beverage giant Coca-Cola’s share price fell sharply lower on Wall Street after it reported quarterly earnings that were in line with market expectations but offered a  much weaker outlook for the rest of  2019 than the market had been hoping for. Coke’s share price dropped by over three percent after the company’s earnings were released before the opening market bell on Thursday.

Coca Cola reported weakened sales for the fourth quarter which showed net sales decreasing by six by percent, although the declining sales beat analysts official estimates. Coke reported revenue of $7.06 billion against expectations of $7.04 billion, with earnings per share coming in exactly in line with market estimates of $0.43 cents per share.

The main reason behind Coca-Cola’s share price slump was the weakened guidance offered to investors for 2019, with the company saying they expect revenues to rise by four percent, which is down from 5% increase seen in 2018. The soda-giant also said that headwinds from currency market would hit net revenues by six to seven percent during 2019, while comparable non-GAAP earnings are expected to fluctuate.

The company also reported a fourth-quarter net income of $870 million, which was much better than the reported loss of $2.75 billion during the same period a year earlier. Yesterday’s fourth-quarter earnings report from Coke said that freight costs negatively impacted its earnings during the last fiscal quarter.

The breakdown of the company’s product sales proved interesting reading for analysts, giving a solid indication of current consumer drinking trends, with the notable standout for Coca Cola sales being the sugarless Coke Zero drink, which saw double-digit growth last year. Juice, plant-based and dairy drink sales dropped by one percent, while enhanced water and sports drinks sales grew by three percent for the year.

 

Coca Cola US Daily Mountain Chart | Source: ActivTrader

Coca Cola US Daily Mountain Chart | Source: ActivTrader

 

The recent decline in Coca Cola’s share price has generated a bearish signal, with the stock now trading below major trendline support and also its key 20-day moving average for the first time since July last year. A further break below the $44.50 support area exposes Coca Cola to further losses towards the $41.00 area. The $46.00 and $47.60 levels are now major resistance on any moves higher from current trading levels.

 

Written by Nathan Batchelor, External Analyst

 

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