Coca-Cola: The stock looks like the real thing

Shares of Coca-Cola ( KO) could have good upside potential. On a technical basis, Coca-Cola's stock chart is beautiful -- a strong uptrend, with minor, constructive pull-backs and a price that continually stays above the 50-day moving average. The stock recently pulled back - but that was because of short-term institutional investors exiting the stock after a run-up. But there are many more long-term institutions that are adding to their positions. Hence, view Tuesday's pull-back as a Buy opportunity.

The company continues to perform well. On Tuesday, Coca-Cola announced third quarter earnings. The company said it earned 83 cents per share beating the First Call consensus estimate of 82 cents per share. Of course, Wall Street drove the shares lower on the morning of the announcement.

Further driving the stock down was the third quarter revenue miss of $8.04 billion vs. First Call's $8.11 billion - which in my view is really statistically neutral or flat. Now, in normal times flat revenue would be a negative, but under these U.S. and global economic conditions, flat is just fine. KO's long-term global revenue growth targets are still attainable, as North America revenue (down four percent in the third quarter) rebounds, and catches up with Latin American and Pacific region revenue gains (up seven percent and six percent respectively, in the third quarter).

Looking ahead, the First Call FY2009/FY2010 EPS estimates for KO are $3.06 to $3.37. The $3.37 estimate for FY2010 will likely prove to be conservative.

I first recommended this stock on February 15, 2009 at a price of $42.68. Since then, its share have risen about 27 percent to $54 per share. Coca-Cola is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50 percent position in KO now; then buy another 25 percent in one month if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75 percent of your KO position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $27.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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