Merrill Lynch Downgrades Coca-Cola Co.

Analyst Christine Farkas believes upside will be limited until there is evidence of improved volume growth and profit leverage

Coca-Cola Co. (KO ) sees earnings per share of 35 cents to 38 cents for the third quarter and 77 cents to 82 cents for the second half of 2004. Merrill Lynch cut its investment recommendation on the shares to neutral from buy.

In a Merrill research report, analyst Christine Farkas says the announcement suggests further challenges to Coke that may take longer to resolve. She notes significant measures are likely to be taken to address challenges; the financial impact is currently unknown. Based on revised volume growth in Europe, and lowered margin assumptions in North America and Europe, she cut her EPS estimates for the third quarter from 54 cents (excluding an impairment charge) to 47 cents, for 2004 from $2.10 to $2.00, and for 2005 from $2.33 to $2.21.

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