Why Credit Suisse Cut Its Estimates on Coca-Cola (KO)

NEW YORK (TheStreet) -- Credit Suisse reduced its estimates on Coca-Cola (KO) after the beverage giant missed analyst expectations for quarterly revenue.

The investment firm reiterated an "outperform" rating, but cut its target price to $46 from $48.

In the three months to December, Coca-Cola reported revenue of $11.04 billion, 3.6% lower than a year earlier and below consensus of $11.31 billion according to analysts surveyed by Thomson Reuters.

"4Q13 top-line results, while still better than peers, nevertheless show just how tough the operating environment for soft drinks companies currently is," wrote analyst Michael Steib in a report. "Going forward, the company is guiding to an operating profit headwind from currencies of -7% which is below our current estimate. This will likely bring EPS consensus estimates down by about 3%."

Credit Suisse guides 2014 earnings of $2.12 a share, 2 cents lower than average analyst estimates.

"The US business model is starting to evolve. While details are still unclear, KO announced that they remain committed to the franchise model in the US and plan to move to the implementation phase of its refranchising plans during 2014 with further announcements to follow "imminently". Our EPS estimates do not include the positive effect from any refranchising announcements in 2014," wrote Steib.

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TheStreet Ratings team rates COCA-COLA CO as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate COCA-COLA CO (KO) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity, good cash flow from operations, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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