Coca-Cola — On Monday, beverage titan Coca-Cola shared its quarterly earnings, which came out as a positive.
The company’s earnings and revenues were revealed to have topped analysts’ expectations.
Factors behind the positive development can be attributed to price hikes and higher demand for the beverage.
On Monday morning trading, shares of Coca-Cola were up by less than 1%.
Based on a survey by Refinitiv analysts, the following is a comparison of the company’s report with Wall Street’s expectation:
- Coca-Cola earnings per share: 68 cents adjusted
- Coca-Cola revenue: $10.96 billion adjust
- Wall Street expected earnings per share: 64 cents
- Wall Street expected revenue: $10.8
Coke reported that first-quarter net income due to shareholders of $3.11 billion (72 cents per share) were up from $2.78 billion (64 cents per share) from 2022.
Coca-Cola earned 68 cents per share, excluding certain tax matters, restructuring changes, and other items.
Additionally, net sales rose by 5%, going up to $10.98 billion.
Organic revenue, which removes the impact of acquisitions and divestitures, went up by 12% in the quarter.
It was largely driven by the higher prices of Coca-Cola drinks.
As with most companies this past year, Coca-Cola has been increasing its prices to counter the effects of inflation.
Majority of the first quarter’s price hikes were implemented in 2022.
However, company executives said Coke raised prices even more across operating segments over the first three months of the year.
However, higher prices have also had a muted effect on the demand for Coke products.
Unit case volume
Coca-Cola’s unit case volume grew by 3% in the quarter, excluding the impact of pricing and currency changes.
In North America, volume was flat, while volume fell by 3% in areas like Africa, Europe, and the Middle East.
However, Latin America and Asia-Pacific regions showed that demand remained strong.
Coke also reported a 3% volume growth with its sparkling soft drinks units.
The Coca-Cola soda showed positive signs, with reports of 3% volume growth.
Meanwhile, Coke Zero Sugar’s volume also saw an 8% increase.
Several of the company’s divisions witnessed volume growth of 4% including:
The surge can be attributed to strong demand for Coke’s coffee and bottled water.
The company’s coffee business reported that its volume saw a 9% volume increase.
Meanwhile, the water division volume rose by 5%.
The tea division saw volume shrink by 4% in the quarter following an earthquake in Turkey.
Sports drinks volume, which covers Bodyarmor and Powerade, also saw declines.
Additionally, the suspension of Coke’s Russian business offset some strong parts, which includes strong sales for the Fairlife dairy brand in the United States.
In February, Coca-Cola projected comparable revenue growth of 3% to 5%, with comparable earnings per share growth at a higher 4% to 5% for 2023.
Meanwhile, Wall Street projected revenue growth of 3.9%, while earners per share growth were cast at 3% for the year.
Coca-Cola CEO James Quincey said:
“Inflation is likely to moderate as we go through the year, and there we expect the rate in which prices are going to increase will start to moderate and become more normal by the end of the year.”
In the latest earnings report, the company said it was projecting organic revenue growth of 7% to 8% with comparable earnings per share growth of 4% to 5%.
Furthermore, Coca-Cola is expecting commodity inflation to impact its cost of goods sold by mid single digits this year.
CFO John Murphy spoke with analysts during the company conference call, saying that while oil spot prices and freight costs are down, other commodities’ higher prices will stay for a longer period.
Murphy added that Coca-Cola is holding on to its financial flexibility during its long-running tax battle with the IRS.
Earlier in November 2020, the US Tax Court maintained that the company owed $3.4 billion in taxes.
Since then, the figure has been cut down to $1.6 billion.
Murphy said the company is waiting for the tax court to make its final opinion on the case before the company moves forward in the appeals process.
“Overall, we don’t expect the tax dispute to have a bearing on our ability to deliver on our capital allocation agenda and drive long-term business growth.”