Coca-Cola: Strong Q1 2019 Top Line
Coca-Cola (KO) released positive first quarter 2019 results this morning. Shares were up ~2.5% in pre-market trading.
Importantly, Coca-Cola managed revenue growth of 5% versus the same quarter a year ago. This is a strong result from a company whose core product (soda) is in slow decline.
This shows that the company’s long-term strategy of building strong brands in other beverage categories (orange juice, water, milk, tea, coffee, etc.) is paying off.
While top-line results were strong, the company grew comparable earnings-per-share just 2% versus the same quarter a year ago.
Look for Coca-Cola’s recent acquisition of Costa to provide an interesting new growth platform in the coffee market for the company over the next several quarters this year.
While Coca-Cola shares are up after this earnings release, we view Coca-Cola as overvalued at current prices. The stock’s lofty valuation does not make up for its mediocre earnings-per-share growth prospects. With that said, Coca-Cola is a high-quality stock with a solid 3%+ yield.
Overall, we rate Coca-Cola as a hold at current prices.
Verizon Dials In An Earnings Beat & Guidance Increase
Verizon reported for its first quarter of fiscal 2019 this morning. While revenue growth was paltry at just 1.1%, the company’s other figures beat expectations.
More specifically, Verizon generated adjusted earnings-per-share of $1.20 in the first quarter, beating estimates by 4 cents and increasing by 2.6% over the same period a year ago. Strong operational results contributed to Verizon’s earnings beat:
The company booked 61,000 retail postpaid net additions, included 174,000 postpaid smartphone net additions.
Retail postpaid churn was 1.125 while retail postpaid phone churn was 0.84%.
Verizon also provided an updated outlook for fiscal 2019 with the publication of its first quarter earnings release. Specifically, the company increased its earnings guidance for fiscal 2019.
Verizon expects low single-digit revenue growth and low single-digit growth in adjusted earnings-per-share in fiscal 2019.
We rate Verizon as a buy at current prices based on its strong 4%+ dividend yield, slightly undervalued stock price, and above-inflation growth prospects.
Procter & Gamble Quarter: Better Than Expected
This morning, Procter & Gamble reported its third quarter (fiscal 2019) financial results.
Revenues of $16.5 billion increased by 1%, driven by 5% organic sales growth and offset by foreign exchange fluctuations and divestitures.
On the bottom line, diluted earnings-per-share increased by 9% while adjusted earnings-per-share increased by 15% .
Procter & Gamble’s performance in the quarter was strong enough to warrant a guidance increase from the consumer goods giant. The company now expects sales growth of “in-line to up one percent,” which includes a negative three to four percentage point impact from foreign exchange.
On the bottom line, adjusted earnings-per-share are expected to increase by three to eight percent. Procter & Gamble also expects to pay over $7 billion in dividends and repurchase approximately $5 billion of common shares in fiscal 2019.
While Procter & Gamble generated strong results in its most recent quarter, we view the stock as pricey currently. As a result, we rate this high-quality blue-chip stock a hold at current prices.
Sherwin-Williams Paints A Q1 Earnings Disappointment
Sherwin-Williams (SHW), one of the world’s largest paints and coatings companies, reported first-quarter earnings results this morning that missed expectations on both the top and bottom lines.
Here’s what the numbers look like:
- Adjusted earnings-per-share of $3.60 versus $3.66 consensus
- Revenue of $4.04 billion versus $4.09 billion consensus
These ‘misses’ are minor and likely not worth focusing on. Importantly, the company’s operational performance was still reasonably strong. Net sales increased by 1.9% while comparable store sales increased by 3.6%.
Sherwin-Williams also reaffirmed its guidance for fiscal 2019 with the publication of its first quarter earnings release. The company continues to expect adjusted earnings-per-share between $20.40 and $21.40. The midpoint of this guidance band implies growth of 12.8% over fiscal 2018 numbers.
We note that the company’s performance will need to improve through the next three quarters if it wants to achieve this guidance number, as Sherwin-Williams’ adjusted earnings-per-share grew by just 0.8% in the first three months of the year.
We view Sherwin-Williams as a hold at current prices.
Lockheed-Martin & United Technology: Two Industry Giants Prepare For Battle
On United Technologies’ side, the firm delivered revenue growth of 20% (including 8% organic growth, which excludes the impact of the recent acquisition of Rockwell Collins). Adjusted earnings-per-share increased by 8% year-on-year, driven by sales growth and partially offset by significant expense increases and higher share count related to the aforementioned acquisition. United Technologies also increased its earnings-per-share guidance, now expecting adjusted earnings-per-share between $7.80 and $8.00 (up from $7.70 to $8.00 previously). The midpoint of this new guidance band represents growth of 3.8% over fiscal 2018.
Lockheed Martin’s performance was even better. The company reported that first quarter revenue rose by 23.2% while earnings-per-share rose by 49% . Like United Technologies, Lockheed Martin also announced a guidance increase, but the latter firm’s outlook revision included boosts to expected revenue, operating profit, earnings-per-share, and cash from operations. Looking at earnings-per-share specifically, the firm expects to generate per-share net income between $20.05 and $20.35, which represents an increase of 14.8% over the same period last year.
Overall, both defense firms reported strong results, but Lockheed Martin’s performance in the first quarter was unquestionably better.
Of the two, we prefer Lockheed-Martin stock. Lockheed-Martin is a strong hold currently.