Market Overview

10 February 2021

Will Coca-Cola and Disney Keep Up Their Financial Standards?

The hot season of corporate reports is going on, and Coca-Cola, the largest producer of soft drinks in the world, with more than $36.6 billion in sales last year, is planning to release its Q4 earnings today. Obviously, the results were under pressure during the pandemic. Numerous cafes, eatery pit stops and restaurants were initially closed and then reopened to invite a very limited number of customers to their establishments and, as a result, the usual volumes of beverages were not ordered. However, the food retailers and delivery networks allowed Coca-Cola to get $7.2 billion of revenue even in the worst second quarter of 2020.

Also in October, Coca-Cola CEOs told the market they expected a remarkable growth in China even before the end of the year, while global beverage and snack sales may continue to decline. In China, consumers are “more or less back to where they were” before the pandemic started, although away-from-home sales are still not at pre-pandemic levels, Coca-Cola's finance chief, John Murphy, told The Wall Street Journal. 

Riding a wave of generally positive expectations, Coca-Cola shares rose in price from $48 at the last week of October to almost $55 by mid-November, then paused at the range above $51 per share, and repeated its $55 achievement during the Christmas rally. In January, the average share price fell again to $48-49, because partial or strict lockdowns activated closures of bars, restaurants, movie theatres and stadiums globally. Today the markets badly need to know from the company's Q4 report if Coca-Cola managed to increase its soda sales again. Another possible source of profits could be non-sugary products and juices that are becoming more and more popular due to people adopting an organic life-style. 

If the report beats the average preliminary estimates of Bloomberg expert polls of 41.7 cents profit per share on $8.6 billion revenue, then the broadly bullish crowd may take the price for Coca-Cola shares even higher than its peak in December. The probability of such a scenario may also depend on today's forward guidance text of the company's CEOs. At the same time, any obstacle or reason in the report, which could  lower the current share price, may immediately inspire the market crowd to switch its direct attention to other actively growing emitters, since the assortment of well-growing companies in different sectors is still rich.

The Starbucks network is also within the same snack or food service sector and its price beat records above $107.50 per share once in January and then again at the beginning of February. Almost everyone also knows Kit Kat or Cadbury chocolates, and Hershey - which is the manufacturer of those tasty sweets - that showed its encouraging financial report on February 4. As a result, Hershey's shares rose by more than 2% since that time. And those are just two examples of a promising choice. 

From the entertainment industry, the Walt Disney Company (DIS) will report tomorrow, February 11, before the opening of Wall Street. The results of the first year of the Disney+ streaming channel are incredible in terms of the number of subscribers, which already exceeded the mark of 86.8 million families, with a target of 80-90 million of subscribers initially set by the company’s management for the year of 2024. As a result, Disney's "vaccine" rally that started at $127.5 in November, has already reached $190 per share by this week.

While much of the way is already behind Disney's shares, on hot expectations for tomorrow's report, there is still a possibility of another jump above $200 per share in case of a new explosive growth in the number of subscribers in January when so many people were sitting home again. Disney's new premiere plans for 2021-2022 may also play an important role in the future decision of the market crowd and large investment funds on whether to take some profit from the shares or move on, and it could be a certainty  that those plans are going to be announced. 

Be that as it may, the House of Mouse has successfully withstood its ground within the online environment in the face of huge losses during the pandemic, as its main tourist theme parks, cruises, and hotels which thrived before the virus on shared group experiences, were no longer available to the public. Wall Street’s analysts are expecting $15.89 billion in sales and only -$0.33 loss per share for its fiscal 2021 first quarter. And those expectations were enough to keep Disney's stocks from falling below the $162 level on a correctional pullback in January, even during the recent flash mob of the higher market volatility.


Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.


Lysakov Sergey
Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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