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Coke Named a Top Pick by Credit Suisse After Q3 Earnings Report

'A textbook quarter for Coke, with clean top-line and outstanding profit delivery in a tough logistics environment,' Credit Suisse said.
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Coca-Cola  (KO) - Get Coca-Cola Company Report on Thursday was designated a top pick by Credit Suisse, after the iconic Atlanta beverage company posted stronger-than-expected earnings for the third quarter.

Adjusted profit totaled 65 cents a share, up from 55 cents in the year-earlier quarter and above the FactSet analyst consensus of 59 cents.

“A textbook quarter for Coke, with clean top-line and outstanding profit delivery in a tough logistics environment,” Credit Suisse analyst Kaumil Gajrawala wrote in a commentary cited by CNBC.

He called Coke’s results “the Aha! moment for an asset-light, inflation shielded business.”

On Thursday, Coke stock traded in line with the market, firming 0.6% to $55.83 in recent trading, close to the S&P 500’s 0.53% gain. The stock on Wednesday had closed 1.9% higher at $55.52.

Credit Suisse reiterated its outperform rating and $63 price target for Coke.

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In the earnings call with analysts and investors, the company’s chief executive, James Quincey, cited a sales rebound at restaurants and movie theaters, CNBC reports.

“Mobility could improve sharply from here, boosting away-from-home consumption,” Gajrawala said. The CEO cited momentum into October, the news service reported.

Morningstar analyst Erin Lash assigns Coke a wide moat. 

“We don’t anticipate making a material change to Coca-Cola’s $58-per-share intrinsic valuation on the heels of solid third-quarter results,” she wrote.

Those results “included 14% organic revenue growth and [0.4 percentage point] of adjusted operating margin degradation to 30%,” Lash noted.

“While the firm was lapping a weak period a year ago (when revenue slumped 6% on an organic basis), we view the balanced contribution from growth in concentrate volume (an 8% increase) and price/mix (a 6% benefit) favorably.”