Coca-Cola Stock Loses Some Fizz: Is It Time to Buy?
Coca-Cola's (NYSE: KO) shares took it on the chin earlier this week after it reported first-quarter earnings results. The stock price fell nearly 3% over the course of Tuesday and closed the day at $45.31 a share. That's despite its $0.51 adjusted earnings per share growing 8% year over year, beating analysts' expectations. Calculated according to generally accepted accounting principles (GAAP), Coke's revenue fell by just 1% from the year-ago period to $8.6 billion, which wasn't bad, considering places like restaurants and movie theaters began shutting down in the last third of the quarter as a result of the coronavirus pandemic.
So why did the stock fall? March saw countries across the globe implement social distancing and stay-at-home orders. This resulted in the abrupt closure of venues like movie theaters, restaurants, and stadiums. Since destinations outside the home accounted for about 50% of the company's revenue, this will hurt Coca-Cola's results going forward. In the first three weeks of April, volume fell by 25%. In its earnings release, management said, "The ultimate impact on the second quarter and full-year 2020 is unknown at this time" and went on to state it believes that impact will be "material" for the second quarter, albeit temporary.
The market hates uncertainty, and the reaction shown by the stock price drop is understandable. It is challenging to analyze a company's prospects in these uncertain times, but taking a long-term view, this presents a buying opportunity.
Source Fool.com
