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Coca-Cola signals uptrend on rise in sales volumes

Coca ColaTwo weeks before, carbonated soft drink manufacturer Coca-Cola Company (NYSE: KO) reported its fiscal 2016 third-quarter results that beat the analysts’ estimates. However, the share price continues to remain stuck at $42 levels. The analysts attribute the 7% decline in the y-o-y revenue to the weakness in the stock. Still, we believe that the following positive developments would propel the stock in the short-term. The shares of Coca-Cola closed at $41.03, up 0.22% or $0.09 on last Friday.

The Georgia-based company reported a decrease in the third-quarter revenues of $10.633 billion, from $11.427 billion in the similar period last year.

During the third-quarter 2016, the net income fell 28% to $1.046 billion, or $0.24 per share, from $1.449 billion, or $0.33 per share, in the similar period of 2015. The analysts polled by Thomson Reuters anticipated revenue of $10.50 billion. Higher soda prices and increase in the sales volume of water and sports drink aided the company to post better than anticipated revenue.


The company reported a 3% increase in the still beverage case unit volume. However, the sparkling beverage case unit volume remained flat on a y-o-y basis. Geographically, the North American segment reported 3% growth in the net revenues and organic revenues.

Excluding transaction gains/losses, among others, the Q3 2016 non-GAAP net income declined marginally to $2.150 billion, from $2.234 billion in the Q3 2015. On a per share basis, the fiscal 2016 third-quarter non-GAAP earnings of $0.49 were lower than the non-GAAP earnings of $0.51 per share in the third-quarter of 2015, but higher than the Zacks earnings estimates of $0.48 per share.

During the quarter, the company introduced ‘Coca-Cola Zero Sugar’ in the Great Britain. Backed by ‘Taste the Feeling’ campaign, the unit case volume registered double-digit growth. In Africa, the Coca-Cola Beverages Africa began its production in the quarter ended September 2016. The company is also on track to save $600 million in production costs through various work related initiatives. Coca-Cola also became the first company in the fortune 500 list to publicly announce that it has achieved the water replenishment target during the quarter.

For the fourth-quarter, the company anticipates net revenues to face 11% headwind from acquisitions and divestitures. The income before taxes is anticipated to face a 6% to 7% structural headwind. However, for fiscal 2016, the company reiterated its 3% organic revenue growth forecast. In line with the prior guidance, Coca-Cola also stated that it expects 4% to 6% decline in the EPS, from $2 in 2015.

The market has a bearish view of the stock. Still, that did not aid in breaking the support at 41. The stochastic oscillator is rising firmly in the bullish zone. This indicates that there is a high probability of an increase in the share price in the near future.

Coca-Cola Stock Price: November 14th 2016

Coca-Cola Stock Price: November 14th 2016

A binary trader can capitalize on the stock’s appreciation through the purchase of a option. The target price for the call option should be $44 or lower. The expiry date for the recommended call option trade should be ideally in the second week of December.

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