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On Mar 26, we maintained a Neutral recommendation on cola giant, The Coca-Cola Company (KO - Analyst Report), following mixed fourth-quarter results announced on Feb 12, 2013.

Why the Neutral Recommendation?

Coca-Cola’s fourth quarter earnings of 45 cents per share marginally beat the Zacks Consensus Estimate of 44 cents by a penny.  Moreover, earnings grew 15% from the prior-year quarter as tepid revenue growth was offset by operating margin growth, which gained from two extra selling days and lower-than-expected currency headwinds. Revenues increased only 4% to $11.04 billion as benefits from volume growth was largely offset by a flat price/mix. The top-line results also marginally missed the Zacks Consensus Estimate of $11.54 billion.

Following the less than impressive fourth-quarter results, estimates largely moved downwards over the past 60 days. The Zacks Consensus Estimate for 2013 went down by almost 1% to $2.14 while that for 2014 declined 0.9% to $2.34 over the last 60 days. Accordingly, Coca-Cola carries a Zacks Rank #4 (Sell).

Moreover, a weak consumer spending environment and muted volume growth of its sparkling beverages (largely due to rising obesity concerns) remain persistent overhangs.

However, we have faith in Coca-Cola’s solid long term fundamentals. Coca-Cola enjoys a global reach, strong brand power, expanding presence outside the U.S. and boasts of a solid cash position. Moreover, the integration of Coca-Cola Enterprises, Inc.’s (CCE - Analyst Report) Bottling business (bought in Oct 2010) and the company’s productivity initiatives are expected to result in significant cost savings, going forward.

Other Stocks to Consider

Some consumer staples stocks that are currently doing well include ConAgra Foods, Inc. (CAG - Analyst Report) and The Procter & Gamble Co. (PG - Analyst Report), both carrying a Zacks Rank #2 (Buy).

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