Jefferies starts Coca-Cola with buy, PepsiCo with hold

Jefferies starts Coca-Cola with buy, PepsiCo with hold

Stock Market Predictions

(Global Markets) - Jefferies initiated coverage on Coca-Cola Co (KO.N) with a "buy" rating, citing the company's dominant global product portfolio and an exposure in the emerging markets.

The brokerage also started coverage on PepsiCo Inc (PEP.N) with a "hold" rating, saying it sees the company being hurt by slower growth in both its domestic and international businesses, modest growth in volume and rising commodity costs.

"We expect (Coca-Cola) to deliver another year of mid-single digit volume growth in 2012 driven by the Latin America, Pacific and Eurasia and Africa segments," analyst Jeff Farmer said in a note to clients and started Coca-Cola with an $80 price target.

Earlier this month, Coca-Cola had said it will invest $2 billion in India over the next five years, to compete with PepsiCo in one of the fastest-growing economies.

However, the analyst said PepsiCo's product portfolio is weighted to slower growing geographies and categories, a disadvantage at a time when investors are increasingly pursuing emerging market exposure.

"About 40 percent of (PepsiCo's) operating income is generated outside of the United States, a big number, but one that puts the company at a disadvantage to its primary global competitor, Coca Cola, at almost 80 percent," Farmer said.

He was also concerned over the possible Frito Lay North America spin-off reported by the New York Post.

"Recent precedents such as Kraft (KFT.N), Sara Lee (SLE.N) and Fortune Brands FO.N suggest that large-cap consumer company spin-offs have not resulted in material value creation," Farmer said.

The analyst set a price target of $70 on PepsiCo stock.

Shares of Coca-Cola closed at $66.62 and those of PepsiCo closed at $64.09 on Thursday on the New York Stock Exchange.

(Reporting by Arpita Mukherjee in Bangalore; Editing by Esha Dey)

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Newell beats; outlook not as bad as feared

Newell beats; outlook not as bad as feared

Stock Market Predictions

NEW YORK (Global Markets) - Newell Rubbermaid Inc (NWL.N) beat Wall Street's lowered quarterly profit and sales expectations as strength in Latin America and Asia Pacific offset weak demand in United States and Europe, sending its shares up almost 9 percent.

The results echoed those from other consumer products makers. Big gains in Latin America covered up U.S. declines at Colgate-Palmolive (CL.N) and Avon Products (AVP.N) as well.

Newell, the maker of Sharpie markers and Rubbermaid storage containers, had already lowered the bar for its new chief executive officer -- former Unilever (ULVR.L) executive Michael Polk. In early June, it predicted a weak second quarter and slashed its 2011 forecast, prompting a 12 percent slide in its shares.

On Friday, investors overlooked the consumer product maker's second profit warning in two months, pushing the stock up 8 percent to $15.51. The stock is still trading below where it was before the June 3 warning.

"The revised guidance is not a surprise in the current economic environment," BMO Capital Markets analyst Connie Maneaty said, adding that the new CEO would likely want to have achievable targets.

The company now expects to earn $1.55 to $1.62 a share this year, excluding items, down from the lowered forecast of $1.60 to $1.67 given just eight weeks ago.

The latest forecast is "slightly above" the $1.50 to $1.55 or so that many analysts were anticipating, said JPMorgan analyst John Faucher.

The average Wall Street forecast is $1.58 per share, according to Thomson Global Markets I/B/E/S.

SHOWTIME FOR NEW CEO

Polk, who joined Newell in mid-July, was not responsible for the second-quarter performance.

Now he is trying to set the company's future tone, including some price increases that Newell asserts are necessary even as shoppers contend with economic woes.

"The consumer environment remains very tough," Polk said. "The debt crisis in the U.S. and across many countries in Europe could further stress consumer confidence."

Despite the uncertain sales climate, the company -- which counts Target Corp (TGT.N), Staples Inc (SPLS.O) and Williams-Sonoma (WSM.N) as customers -- raised its prices again in July as it pays more for oil, resin and other necessities.

As prices have gone up, the company is seeing some consumers buy less, as it expected, Polk said.

The company is well-positioned for the back-to-school season, Polk said. However the "key uncertainty is whether the consumer will show up and spend."

TAKING DOWN SALES EXPECTATIONS

Oppenheimer analyst Joe Altobello was more skeptical about Newell's sales prospects for the rest of the year and concerned about rising commodity costs. He rated Newell's shares at "perform" despite what he called a "reasonable" valuation.

Newell forecast core sales growth of 1 percent to 3 percent, down from its previous forecast of 3 percent to 4 percent. Core sales exclude foreign currency impact.

Net income rose to $146.7 million, or 49 cents a share, in the second quarter, from $130.4 million, or 41 cents a share, a year earlier.

Excluding items, the company earned 46 cents a share, beating the analysts' average estimate of 42 cents, according to Thomson Global Markets I/B/E/S.

Net sales rose 5.1 percent to $1.57 billion, while analysts expected $1.55 billion.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn, Derek Caney and Gunna Dickson)

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Coca-Cola FEMSA Q2 profit seen up almost 6 percent

Coca-Cola FEMSA Q2 profit seen up almost 6 percent

Stock Market Predictions

MEXICO CITY (Global Markets) - Mexican bottler Coca-Cola FEMSA, the largest coke bottler in Latin America, will report an almost 6 percent rise in second-quarter profit, helped by price increases and solid sales, analysts say.

According to a Global Markets survey of five analysts, Coca-Cola FEMSA (KOFL.MX) (KOF.N) will report a profit of about 2.62 billion pesos ($224 million), compared to a profit of 2.48 billion pesos in the year-earlier period.

The company, a joint venture between The Coca-Cola Co (KO.N) and Mexican company FEMSA (FMSAUBD.MX), will report revenue up almost 9 percent in the quarter, according to the survey.

Analysts said investors will be listening for any comments Coca-Cola FEMSA may make about opportunities to expand and deploy the large sums of cash it has on hand.

"In the second quarter, we expect growth rates to remain attractive, but investors may continue to question (Coca-Cola FEMSA and parent FEMSA's) "unhealthy" balance sheets," wrote HSBC analysts in a report.

Coca-Cola FEMSA, which will report second-quarter results on July 20, recently announced plans to buy the drinks division of Mexican company Grupo Tampico in an all stock deal that allows it to maintain a strong cash position on its balance sheet.

The company has more than $1 billion in cash, which it could use to finance further acquisitions, invest in its business or pay a large dividend to shareholders.

Following is a table with the expected results.

(Reporting by Gabriela Lopez)

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