Will Coca-Cola (KO) Stock React Negatively Today to Planned Job Cuts?

NEW YORK (TheStreet) -- The Coca-Cola Co. (KO) is planning to cut at least 1,000 to 2,000 jobs globally in the upcoming weeks, the Wall Street Journal reports. It would be the company's biggest job cut in 15 years.

Shares of Coca-Cola are up 1.18% to $42.85 in early afternoon trading on Tuesday.

The soft drink and alternative non-alcoholic beverage maker is also tightening its budget, the Journal added, telling its executives to take cabs instead of limos, and dropping its expensive Christmas party for Wall Street analysts.

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These plans are a part of Coke's $3 billion cost-cutting initiative, the company announced back in October, following a warning stating it would miss its profit targets this year and next year, as consumers cut back on their soda intake, the Journal noted.

Investors are concerned Coke won't be able to pull off its plan, and are questioning whether or not the cuts will be sufficient, the Journal said.

"Their track record in cutting costs has not been very strong, so there's a reluctance among investors to believe in them," a Sanford Bernstein analyst told the Journal.

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

"We rate COCA-COLA CO (KO) a BUY. This is driven by multiple 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 expanding profit margins, reasonable valuation levels, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for COCA-COLA CO is rather high; currently it is at 65.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.65% is above that of the industry average.
  • COCA-COLA CO's earnings per share declined by 11.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, COCA-COLA CO reported lower earnings of $1.90 versus $1.96 in the prior year. This year, the market expects an improvement in earnings ($2.03 versus $1.90).
  • KO, with its decline in revenue, slightly underperformed the industry average of 0.6%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: KO Ratings Report

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