On The Fly: What to watch in Coca-Cola earnings report

Coca-Cola (KO) is scheduled to report results of its fiscal first quarter before the market open on Tuesday, April 23, with a conference call scheduled for 8:30 am ET. What to watch for: 1. GUIDANCE: When Coca-Cola reported its fourth earnings on February 14, the company gave Q1 guidance, saying it saw a comparable net revenues tailwind of 6%-7% from acquisitions, divestitures and structural items, along with a 6%-7% currency headwind based on the current rates, including the impact of hedged positions. The company also gave fiscal year 2019 guidance, saying it saw FY19 comparable continuing operations earnings per share growth of (1%)-1% year-over-year, along with approximately 4% growth in organic revenues, and 12%-13% growth in comparable currency neutral net revenues. The company estimated FY19 capital expenditures at approximately $2B, and said it saw FY19 cash from operations of at least $8B. Overall, Coca-Cola said it saw global growth in 2019 "slightly" lower than 2018, but said it was having a "good start" to 2019, adding that it saw the impact of some increasing uncertainty and volatility in global macroeconomic conditions, but that demand for categories remains "healthy." 2. DIVIDEND, BUYBACK: On February 21, the Coca-Cola board approved an annual dividend increase, raising the quarterly dividend 2.6%, to 40c per common share from 39c per common share. The quarterly dividend is equivalent to an annual dividend of $1.60 per share, up from $1.56 per share in 2018. The company also announced that it authorized a new share repurchase program for 150M additional shares of the company's common stock, taking effect at the conclusion of the company's existing program. 3. HSBC CUTS RATING, TARGET: On March 12, HSBC analyst Carlos Laboy downgraded Coca-Cola to Hold from Buy, stating that in "trying to grow the pie," Coke is being required to drive revenues with low-margin brands that may take years to scale up. If the "brands that pay the bills" hardly grow and the ones that grow aren't profitable enough, "convincing bottlers to believe" gets harder, said the analyst, who contended that "if the bottlers aren't happy, nobody's happy." The analyst, who also cited valuation given Coca-Cola's flat EPS guidance, lowered his price target on Coke shares to $50 from $64.