Coca-Cola's (NYSE:KO) share price has been moving higher this year on a wave of analysts' sentiment that may continue now that the Q1 results are in. The caveat is that no analysts have come out with commentary despite the strength of the results and the price action is sketchy.
Shares of KO surged in the pre-market session following the release, opened at the all-time high, moved up to set a new all-time high, and then fell hard on profit-taking. This move may lead to consolidation and continuation of the trend, but it may not. The Coca-Cola Company is a highly-valued stock at 27X its earnings, which may cap gains even with the 2.7% dividend yield.
The Coca-Cola Company Blow Past Consensus
The Coca-Cola Company was expected to produce a strong quarter driven by reopening and growth efforts supported by stay-at-home trends. The $10.5 billion in revenue is not only strong at up 16.7% over last year, but it beat the Marketbeat.com consensus by 680 basis points. Internally, revenue was driven by a 7% increase in price/mix and an 11% increase in volume. On a segment basis, Latin America led with a gain of 39%, followed by Global Market Ventures at 34%. EMEA grew by 22% and North America by 14%.
Moving down to the income, The Coca-Cola Company widened the operating margin on a GAAP and adjusted basis. The GAAP operating margin improved by 230 basis points to drive a 25% increase in operating income. The margin improved by a lesser 40 basis points on an adjusted basis but still drove a 16% increase in YOY earnings. On the bottom line, the $0.64 in adjusted EPS beat the consensus by $0.06.
The company updated its guidance due to the strength in sales and the impact of exiting Russia. The company expects Russia to cost it about 1% to 2% in revenue and $0.04 in EPS but maintained its guidance at all levels. This is good news for the market but was not enough to keep share prices moving higher.
The Institutions Put A Top In The Coca-Cola Company
The institutions were actively buying The Coca-Cola Company last year, but that ended in Q1 of 2022. Net activity over the last four quarters is worth about 3.25% of the market cap, about $9.2 billion worth of shares, and pushed total ownership up to 68%.
Then, in Q1, institutional activity, including buying and selling, came to a near halt and turned net bearish. This situation may persist now the Q1 results are out and, if so, could keep the stock range-bound for the foreseeable future. However, if institutions start selling more vigor, price action could enter a correction.
The Technical Outlook: The Coca-Cola Company Peaks Out
Shares of The Coca-Cola Company hit an all-time high just days before the Q1 release and are now pulling back from that level. The price action is strong and confirms the presence of resistance that could be strong enough to keep this stock from moving higher.
The indicators are consistent with this peak, so we expect to see a consolidation or pull back. If price action cannot hold the current levels, a pullback to the $63 level is expected. If that level fails, a move down to $60 is possible.
