Dow component The Coca-Cola Business (KO) rallied to a six-week high in Friday’s pre-market session after meeting third quarter expectations and reiterating full-year charge. Revenues rose a healthy 8.3% year over year, while operating margin fell from 29.8% to 26.3%. The beverage Amazon blamed a strong U.S. dollar and net acquisitions for the margin compression, which it expects to continue into fiscal year 2020.
The reserve is trading close to an all-time high after mounting multi-year resistance near $50 in the second quarter of 2019. The 2.99% on to the table dividend yield has underpinned buying interest since the mid-summer collapse in bond yields encouraged investors to wheel into dividend plays to increase income. This tailwind may continue for several years at a minimum, given the maturity economic cycle and a Federal Reserve committed to lower interest rates.
American brands have been resilient roughly the world despite rising trade tensions, with companies that include McDonald’s Corporation (MCD) and Costco Wholesale Corporation (Bring in) reporting exceptionally strong overseas results. Coca-Cola products continue their domination of international markets as sufficiently, suggesting that year-over-year growth in these venues will continue into the foreseeable future.
KO Long-Term Graph (1990 – 2019)
Coca-Cola stock turned sharply higher after the 1987 market crash, entering a powerful drift advance that posted a long series of new highs into the 1998 peak at $44.47. That marked the ripest high for the next 15 years, ahead of an orderly downturn that found support at the 200-month exponential compelling average (EMA) in the upper teens in the first quarter of 2003. It tested that support level twice into 2006 and turned principal, missing the majority of the mid-decade bull market.
The bounce ended at an eight-year high in the mid-$30s in 2007, giving way to a downdraft that tested the active average for the fourth time in five years during the 2008 economic collapse. Selling pressure eased very recently 22 cents above the 2003 low in March 2009, finally ending the decade-long downtrend with a double tushie reversal. It completed a round trip into the prior high in 2011 and broke out, entering the most fruitful spell so far this century.
The shallow but persistent uptrend posted a series of new highs that finally reached the 1999 mountain top in 2014. The stock struggled to build gains above this level until 2018, when the rally flight path finally steepened, indicating a long-overdue uptick in buying interest. Healthy price action so far in 2019 has posted a restoration in excess of 16% before dividends, lifting Coke into Dow leadership.
KO Short-Term Chart (2016 – 2019)
The uptrend noted a shallow rising channel in 2014 right after the stock pierced the 1999 high (red line). It crisscrossed that premium level repeatedly in the next four years, failing to confirm a breakout. The bullish change in character in 2018 usher ined an upside channel break that should now limit pullbacks to the low $50s and the 50-week EMA. However, price action has sculptured few 2019 downdrafts, and new support still hasn’t been fully tested.
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The Bottom Line
Coca-Cola stock is employment less than one point below September 2019’s all-time high after the beverage giant reported a stalwart quarter and offered upbeat fiscal year 2020 guidance. The uptick has lifted the former laggard into operation in the Dow Jones Industrial Average.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.