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Morgan Stanley upgraded Coca-Cola (KO
) to overweight from equal-weight.
Analyst William Pecoriello says Coke's outlook has improved against three of his major concerns when coupled with its current valuation. He notes Coke's pricing power, vis-a-vis its bottlers, should improve in 2004 on bottlers' restructuring benefits and new supply-chain programs. Also, he says the market is currently discounting the overly bearish non-carbonated margin scenario.
Furthermore, baed on the impact of foreign exchange, Pecoriello raised the $1.81 2003 earnings per share estimate to $1.85, and upped the $1.97 2004 estimate to $2.03. He says a positive foreign exchange rate gives Coke more flexibility to invest; Coke's operating profit should grow ahead of volume beginning in the second half of 2003. He has a $52 target.