Dow dog Coca-Cola to rebound by 19%, says Deutsche Bank

Published Thu, Aug 4 201612:15 PM EDT

The time to buy Coca-Cola shares is now while the stock is weighed down by concerns about slowing growth in emerging markets, said a Deutsche Bank analyst, who sees the stock eventually rallying 19 percent in the next 12 months. "While there are justified growth concerns related to the fallen BRICs [Brazil, Russia, India and China], especially China (but modestly offset by Indian strength), we continue to believe Coke is building a much better mouse trap more closely aligned with the realities of consumption drivers in the different markets where it competes, even if it isn't readily apparent in recently reported results," said Deutsche Bank's Bill Schmitz in a Wednesday note to clients. Coca-Cola shares are up just a little more than 1 percent since the beginning of this year, trailing behind blue chip peers in the Dow Jones industrial average which has climbed more than 5 percent so far in 2016. Even though the soft drink and beverage company had an earnings beat last week , it slashed its revenue forecast for the full year to just 3 percent from 4 to 5 percent. The beverage giant cited falling sales growth and volume in China because of a weakening consumer environment. "Management is resolute in its path forward as a leaner and more brand-centric operator once the refranchising is done and still sees a clearing path to the 4-6 percent organic growth algorithm that the model pivots on. Overall, market shares are strong, price realization in high per cap consumption markets remains healthy and company will invest through the EM slowdown to come out the other side better positioned from a brand equity and growth perspective, health and wellness concerns aside," said the note. China is struggling to shift from a manufacturing to a consumer-based economy that would benefit Coca-Cola sales. The Asian country posted GDP growth of 6.9 percent in 2015, the slowest it's been in 25 years. The iShares China Large-Cap ETF , which tracks large-cap Chinese equities, is little changed this year and down more than 12 percent over the past 12 months. "With EM macro-driven slowdown in organic sales despite still solid growth in the company's most profitable developed markets, we understand why the investment thesis has lost some steam with shorter-term investors given limited immediate catalysts," said the note. "However, we remain steadfast that a faster-growing, immensely more profitable and higher-return Coca-Cola Co. will drive combination or faster earnings growth and higher valuation multiple over time." Schmitz reiterated his $52 price target for Coca-Cola, which represents a 19 percent gain from the previous close. The stock was near $43.70 on Thursday. — CNBC's Michael Bloom contributed to this story.

A man delivers beverages from a Coca-Cola truck in New York City.

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"While there are justified growth concerns related to the fallen BRICs [Brazil, Russia, India and China], especially China (but modestly offset by Indian strength), we continue to believe Coke is building a much better mouse trap more closely aligned with the realities of consumption drivers in the different markets where it competes, even if it isn't readily apparent in recently reported results," said Deutsche Bank's Bill Schmitz in a Wednesday note to clients.