Coca-Cola (KO) reports Q2 earnings on July 17th and Credit Suisse will be looking for insight into how the emerging market consumer is reacting to reduced fuel subsidies and increased food inflation. The bank, however (like most firms on Wall St.), is unconcerned about KO’s risks and sees major upside following the stock’s recent fall:
- We reiterate our view that worries about cost pressures and food inflation in emerging markets seem overblown, especially when benchmarked against emerging market bottlers who are optimistic about the long-term prospects for the Coke brands and continue to invest against the business.
- In North America, the balance of the year will likely be weak. We would not hold our breath for a turnaround of the U.S. business in the short-term simply because we reside in it. But we remain of the view that KO does not need to fix North America to reach its long term growth algorithm targets.
- We are raising our 2Q08 estimate to $0.95 from $0.92 and our 2008 estimate from $3.07 to $3.10 to reflect our updated currency assumptions.
Credit Suisse reiterates OUTPERFORM on Coca-Cola (KO), target price $68.