** OPTION TRADE: Buy the KO SEPT16 2016 45.000 call at approximately $1.25. Place a pre-determined sell at $2.50.
Note: No protective stop losses added -- but if you wish to do so make it $0.50.
by Ian Harvey
July 26, 2016
The stock has a market cap of $18.24 billion and a P/E ratio of 25.95. The stock has a 50-day moving average price of $37.06 and a 200-day moving average price of $46.68. Coca-Cola Enterprises has a 52-week low of $33.67 and a 52-week high of $54.54.
Coca-Cola and its peers are implementing several productivity initiatives to mitigate the impact of a volatile macro environment and softness in soda volumes. Its productivity initiatives involve the restructuring of its global supply chain, implementation of zero-based budgeting, and streamlining and simplifying the company’s operating model. It’s also working to increase discipline and efficiency in its direct marketing investments.
Coca-Cola expects to generate more than $600 million in productivity savings in fiscal 2016. The company aims to generate total annualized productivity savings of about $3.6 billion by 2019. It would redirect these productivity savings to marketing efforts and innovation to boost revenue.
On July 20, 2016, Coca-Cola Brazil announced the launch of Café Leão, a high-quality, locally sourced and locally produced coffee that will be sold exclusively in Brazil. After the initial launch of Café Leão in Rio de Janeiro, São Paulo, and Curitiba, the company plans to expand it across Brazil starting in January 2017. The company also plans to offer Café Leão to Brazilian consumers on e-commerce channels effective September 2016.
In June 2016, Coca-Cola purchased a minority stake in Aloe Gloe, an aloe water beverage. Aloe Gloe is a certified organic, non-GMO (genetically modified organism), gluten-free drink.
In March 2016, Coca-Cola acquired Xiamen Culiangwang, a producer of plant-based protein drinks sold in China. Xiamen Culiangwang sells products under the brand China Green Culiangwang.
In January 2016, Coca-Cola acquired a minority stake in Chi Limited, Nigeria’s leading juice and value-added dairy company. In August 2015, Coca-Cola bought a ~30% stake in Suja Juice, a California-based manufacturer of organic juices, that uses a technology called high-pressure processing to preserve nutrition and taste.
Coca-Cola’s strategic acquisitions in still beverage brands will help it address the growing consumer demand for better beverage options.
TheStreet Ratings rated this stock as a "buy" with a ratings score of A-.
The company's strengths can be seen in multiple areas, such as its notable return on equity, solid stock price performance and expanding profit margins. TheStreet Ratings feels its strengths outweigh the fact that the company has had generally high debt management risk by most measures that TheStreet Ratings evaluated.
Also, Coca-Cola Enterprises Inc was upgraded by equities research analysts at Societe Generale from a “hold” rating to a “buy” rating in a note issued to investors last Tuesday.
Also, several other equities research analysts have recently commented on the company.
• Susquehanna restated a “hold” rating on shares of Coca-Cola Enterprises in a research note on Sunday. Evercore ISI restated a “buy” rating on shares of Coca-Cola Enterprises in a research note on Sunday, June 26th.
• Vetr upgraded shares of Coca-Cola Enterprises from a “hold” rating to a “strong-buy” rating and set a $55.50 price target on the stock in a research note on Tuesday, May 31st.
• Finally, Stifel Nicolaus initiated coverage on shares of Coca-Cola Enterprises in a research note on Wednesday, June 1st. They issued a “buy” rating on the stock.
Two research analysts have rated the stock with a sell rating, ten have given a hold rating, seven have issued a buy rating and one has given a strong buy rating to the company. The company presently has a consensus rating of “Hold” and a consensus price target of $51.78.
Harvey’s Options Volatility Indicator
Conclusion
KO has been stuck in a sideways pattern since the start of May, partially due to a P/E of 27.5. A solid report should send the stock higher, and possibly drive shares above the 52-week high.
Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..
** OPTION TRADE: Buy the KO SEPT16 2016 45.000 call at approximately $1.25. Place a pre-determined sell at $2.50.
Note: No protective stop losses added -- but if you wish to do so make it $0.50.