The Coca-Cola Co (NYSE:KO) will report its 4Q2015 earnings results on the morning of Feb. 9, 2016. As an investor, what should you expect from the company? Analysts on the average are predicting that Coca-Cola’s EPS will shrink from a similar quarter last year. They are modeling EPS at $0.37, suggesting 16% YoY downside.
Why soft EPS?
There are a number of factors that could hinder Coca-Cola Co(NYSE:KO) from posting EPS growth in the upcoming report. Currency translation headwinds, global economic rout and health risks associated with soda consumption are likely to be blamed for the EPS decline.
Coca-Cola Co (NYSE:KO) has consistently paid dividends for years. The company’s current dividend rate is $1.32 per share annually. Because of the management’s committed to returning more free cash flow to shareholders, it is likely that a dividend boost could be announced at the upcoming earnings event. A dividend hike should calm investors if EPS were to decline in 4Q was widely expected.
Trouble in emerging markets
China is one of the fast-growth emerging markets that Coca-Cola sees more growth headroom, but the country’s economy has been bad news in the recent times. It is possible China’s economic slowdown limited uptake of Coca-Cola’s products in the country during 4Q. It is worth remembering that China recorded its slowest economic growth in more than 25 years in 2015. As such, it is likely China’s economic slowdown pinched Coca-Cola.
Remaking of Coca-Cola
Coca-Cola Co (NYSE:KO)’s management is aware of the various challenges facing the company in both developed and developing markets. To confront these challenges and pave way for long-term growth, the management has put a numbers of strategies in place. For example, the company is reducing its bottling assets to apparently lower its operating risks amid flat or declining soda sales.
To tackle health concerns associated with soda consumption, Coca-Cola can be seen working to reduce the size of soda packages it sells. The company is betting that people will be willing to continue consuming smaller amounts of soda even if more sparingly than in the past. Additionally, the company is expanding into energy, milk and juice drinks to cater to customers ditching its legacy soda drinks.