Morgan Stanley upgraded shares of Coca-Cola (NYSE:KO) on Tuesday, saying the stock is trading at a very attractive valuation based on its history and relative to likely better-than-expected earnings in coming years.
The firm upgraded Coca-Cola to overweight from equal weight and raised the 12-month price target to $55 from $52. Coca-Cola closed Monday at $48.05, slightly higher for 2019. Its shares opened Tuesday up 75 cents, or 1.6%, to $48.81
The shares trade at 22.3 price-earnings ration based on the next 12 months’ earnings. That’s about even with PepsiCo (NASDAQ: PEP) and Procter & Gamble (NYSE: PG) when historically the stock has traded at a valuation above peers.
"Surprisingly, despite clear historical proof, this is not being recognized in valuation at what we see as an unfair discount to peers," states the analyst, which raised 2020 and 2021 earnings per share estimates by 0.4% and 1.7% respectively and the analyst is now above the consensus estimates on Wall Street.
Also, last week, Panda Restaurant Group, Inc., the parent company of Panda Express, America's largest family-owned and operated Asian restaurant concept, announced that more than 2,000 Panda Express locations in the United States are now serving beverages from The Coca-Cola Company's broad portfolio of sparkling soft drinks, teas and waters.
In Q4 2018, Panda signed a multi-year agreement with Coke to be the new strategic beverage partner and, together, the two companies completed one of the fastest beverage transitions in Coca-Cola's partnership history.
