Analysts from Susquehanna and Roth Capital weighed in yesterday on The Coca- Cola Co (NYSE:KO) and Yelp Inc (NYSE:YELP) following Q4 earnings from both. While one is neutral on Coca Cola, citing increased unit volume growth though questionable guidance, the other is bearish on Yelp, citing a discontinued revenue segment and aggressive guidance expectations.
The Coca-Cola Co
Analyst Pablo Zuanic of Susquehanna weighed in on Coca Cola yesterday after the company posted its Q4:2015 earnings report. The report indicated in-line revenues and slightly higher than expected EPS, with gross margin and SGA “much lower than expected.” The analyst credits this drop in margins due to “the deleveraging effect” of decreased shipping days in North America, though notes that Europe benefitted from margin gains.
The analyst expresses positive sentiment regarding unit case volume growth; a “true underlying metric.” Going forward, the analyst will focus on unit case volume growth in the company’s North American and Western Europe segments, “where it continues to gain pricing.” This metric is even increasing in Latin America “despite high inflation.” For 2016, the company guided a 4-5% revenue growth but lower than expected EPS. As a result of guidance, the analyst comments, “momentum into 2016 is mixed, so we prefer to rate it Neutral.”
On February 9, 2016, the analyst maintained his Neutral rating on the Coca Cola with a $40 price target. Pablo Zuanic has a 27% success rate recommending stocks with an average loss of (5%) per recommendation.
According to TipRanks’ statistics, out of the 7 analysts who have rated the company in the past 3 months, 4 gave a Buy rating while 3 remain on the sidelines. The average 12-month price target between these 7 analysts is $46.50, marking a 7% upside from where shares last closed.
Following earnings, Roth Capital analyst Darren Aftahi weighed in on Yelp. For this report, the company posted higher than expected revenue, though lower than expected EPS and much lower than expected adjusted EBITA. The analyst attributes this miss to “much higher than predicted sales and marketing.” While local advertising and brand advertising revenue was slightly higher than the analyst predicted, contributing to 40% y/y growth, he states that the company will phase out the latter, which will “no longer be a contributor to revenue going forward.”
The analyst also cites the departure of CFO Rob Krolik, the “second departure of a major executive in less than a year,” which leads him to believe “M&A chatter could cool in the long term.” The analyst is skeptical of the company’s “significantly lower” EBITDA guidance for the next quarter due to higher sales and marketing expenses. He continued, “We believe the implied 2H16 EBITDA guide ramp seems aggressive, if not unlikely, given how much the company has to spend to drive new revenue growth, especially with an increasingly competitive backdrop.” Considering the company’s negative operating leverage of the past two years, the analyst believes this trend will continue in the first half of 2016, and remains bearish.
On February 9, 2016, the analyst reiterated his Sell rating and lowered his price target to $12.50 from $15. Darren Aftahi has a 47% success rate recommending stocks with an average loss of (4.3%) per recommendation.
According to TipRanks’ statistics, out of the 18 analysts who have rated the company in the past 3 months, 8 gave a Buy rating, 1 gave a Sell rating, while 9 remain on the sidelines. The average 12-month price target for the stock is $23.41, marking a 49% success rate from where shares last closed.