NEW YORK (TheStreet) -- Investors looking for a second-half bounce-back candidate that pays a solid dividend with a 3.3% yield may do well by owning shares of Coca-Cola (KO - Get Report).
The stock may get a boost on Wednesday when Coke releases its second-quarter results, just as PepsiCo's (PEP) stock did last week after the company reported earnings that beat estimates.
Coke is expected to report second-quarter earnings of 60 cents a share on revenue of $12 billion, both of which would be below the numbers from a year earlier. For the full year, adjusted earnings are projected to fall to $2.01 a share from $2.04 a share last year, while revenue is expected to drop 2.5% to $44.86 billion.
Shares of the world's largest beverage company have dropped 2.5% so far this year. The projected declines in both quarterly and full-year earnings have a lot to do with that. If you have held Coke shares over the past year, your thirst for gains remains unquenched. But that's in the past.
Things are about to get better for Coke, according to UBS analysts, who last week upgraded their rating on the stock to buy and assigned a 12-month price target of $48. With Coke's stock resting at around $41, that suggests a gain of 17% for investors who buy now. And why wouldn't you? The risk in Coke's stock, spurred by a global decline in soda consumption, is no longer news.
Concerns about artificial sweeteners and rising obesity rates have driven consumers toward healthier drinks. Coke's volume and revenue have taking huge hits the past couple of years, particularly in North America, which explains why Coke's stock has been range-bound for two years, bouncing between $36 and $44 per share. Take a look at the black line on the chart, courtesy of Yahoo! Finance.
In their note, UBS analysts Stephen Powers and Megan Cody emphasized Coke's pricing power and productivity, which were evident in the company's first-quarter results where -- despite weak revenue -- the company still delivered 8% organic revenue growth, driven by a 3% increase in prices.
That means Coke's profit rose even as volume and sales declined. And despite the impact of the strong U.S. dollar that devalues Coca-Cola's sales in overseas markets, the company has beaten its average analyst earnings estimate in two straight quarters, driven by stronger-than-expected demand in North America, which is the company's largest market. And I'm not willing to bet my own money that Coke will miss on Wednesday.
By Richard Saintvilus
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