Beverage maker Coca-Cola (KO)is scheduled to report third-quarter 2023 results on Oct 24 before market open. Let’s take a closer look at its fundamentals ahead of the earnings release. The Coca-Cola stock has plunged about 8.4% over the past month, underperforming the Zacks industry average decline of 6.6%. In the past three months, the stock dived about 12.3% (as of Oct 16, 2023).

Talks are doing rounds that Coca-Cola shares have fallen in the third quarter despite raising the view for 2023 (during their Q2 result release) due to the craze for weight-loss drugs like Ozempic and Wegovy. The news triggered suspicions that drugs like Ozempic, which work as appetite suppressants, are hurting the demand for packaged food and beverage.

Let’s take a look at what lies for the third quarter.

Solid Surprise History

Coca-Cola boasts a robust surprise trend, which continued in second-quarter 2022. Its sales beat the consensus estimates for the 10th straight quarter in second-quarter 2023. The company reported the second consecutive quarter of bottom-line beat. Earnings and sales also improved year over year.

Upbeat Price Target

Based on short-term price targets offered by 14 analysts, the average price target for Coca-Cola comes to $69.71. The forecasts range from a low of $60.00 to a high of $75.00. The average price target represents an increase of 31.8% from the closing price of $52.89 (as of Oct 16, 2023).

Earnings Whispers Ahead of Q3 Release

Coca-Cola has an Earnings ESP of -1.09% and a Zacks Rank #4 (Sell). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Coca-Cola saw a negative earnings estimate revision of a penny over the past 90 days for the to-be-reported quarter. The beverage maker’s Most Accurate Estimate is 68 cents, down by a penny from the Zacks Consensus Estimate of 69 cents.

Analysts decreasing estimates right before earnings — with the most up-to-date information possible — is not a good indicator for the stock. The Zacks Consensus Estimate for the third quarter indicates flat earnings growth and revenue growth of just 3.6%.

Pros & Cons Ahead of Q3 Earnings Release

We anticipate organic revenue growth of 6.4% for the third quarter, down from 11% recorded in the second quarter.  However, our projections meet Coca-Cola’s organic revenue guidance of growth of 8-9% for 2023. The operating margin is expected to be 28.8% for Q3, down from 31.6%.

There are concerns about flat sales volumes and worries that the company's product price increases won't be enough to keep revenue rising for much longer, per a Motley Fool article.

But then, currency headwinds are likely to be a little lower. Profit margin is rising and remains far above that of rivals like PepsiCo (PEP Quick QuotePEP - Free Report) . PepsiCo has a Zacks Rank #2 (Buy).

Also, we anticipate 2% currency headwinds, down from 4% from Q2. Coca-Cola is cash-rich, too, which helps the company indulge in buyback and dividend payments. The dividend yield is 3.44%.

ETFs in Focus

Against this backdrop, investors can keep a watch on Coca-Cola-heavy ETFs like iShares U.S. Consumer Staples ETF (IYK Quick QuoteIYK - Free Report) , Vanguard Consumer Staples ETF (VDC Quick QuoteVDC - Free Report) , Fidelity Covington Trust MSCI Consumer Staples Index ETF (FSTA Quick QuoteFSTA - Free Report) and First Trust Nasdaq Food & Beverage ETF (FTXG Quick QuoteFTXG - Free Report) . Coca-Cola holds 7% to 10% weight of the fund.