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Market Update

Earnings on Tap: Coca-Cola

The beverage giant is well-placed to tap growth opportunities in emerging markets, but the stock doesn't look terribly attractive at current prices.

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Coca-Cola (KO) is scheduled to report first-quarter numbers Tuesday before the bell. The consensus estimate calls for earnings of $0.45 per share compared with $0.44 per diluted share earned in the corresponding year-ago period.

The beverage giant's fourth-quarter earnings came in 13% higher at $1.87 billion, or $0.41 per share, on revenues of $11.46 billion. The company reported worldwide volume growth of 4% for the full year and 3% in the last quarter. Full-year volume growth in key emerging markets--Thailand (+22%), India (+16%), and Russia (+8%)--was particularly strong.

Chairman and chief executive officer Muhtar Kent said the company needs "to continue investing in its businesses" for long-term growth. According to Morningstar analyst Thomas Mullarkey, Coke and its bottling partners intend to invest billions during the next few years in countries such as China, Russia, and Brazil, where per-capita consumption is increasing amid a burgeoning middle class. With declining consumption of carbonated beverages in North America, international markets would provide plenty of growth opportunities over the longer run, Mullarkey adds.

Absent any strategic missteps, Morningstar views Coca-Cola as a safe haven in an uncertain economic environment, given that the firm has one of the widest moats in our consumer coverage universe.

The stock has climbed more than 13% since the start of the year and is presently trading above Mullarkey's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.