Vita Coco Company (COCO) Surges 5.5%: Is This an Indication of Further Gains?

Vita Coco Company, Inc. (COCO) shares soared 5.5% in the last trading session to close at $55.77. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 2% loss over the past four weeks.

Vita Coco’s stock rally is an extension of its inclusion in the S&P SmallCap 600. The addition, effective March 25, is driving incremental demand from index funds and passive investors that track the benchmark, providing a near-term technical boost to the stock. This development follows the removal of TEGNA Inc. after its acquisition by Nexstar Media Group, creating a vacancy that Vita Coco now fills within the consumer staples segment.

The rally reflects both technical buying flows and growing investor confidence in Vita Coco’s positioning within the better-for-you beverage category. As passive inflows combine with favorable sentiment around its growth prospects, the stock’s recent strength appears to be a continuation of this positive catalyst-driven momentum.

This company is expected to post quarterly earnings of $0.34 per share in its upcoming report, which represents a year-over-year change of +9.7%. Revenues are expected to be $148.88 million, up 13.7% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Vita Coco Company, the consensus EPS estimate for the quarter has been revised 1.5% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on COCO going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Vita Coco Company is a member of the Zacks Beverages - Soft drinks industry. One other stock in the same industry, Luckin Coffee Inc. Sponsored ADR (LKNCY), finished the last trading session 0.2% lower at $32.8. LKNCY has returned -15.6% over the past month.

Luckin Coffee's consensus EPS estimate for the upcoming report has remained unchanged over the past month at $0.26. Compared to the company's year-ago EPS, this represents a change of +8.3%. Luckin Coffee currently boasts a Zacks Rank of #4 (Sell).

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This article originally published on Zacks Investment Research (zacks.com).

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