Coca-Cola Beats On Income, Misses On Revenue

The Coca-Cola Co. (NYSE:KO) beat analysts’ estimates for net income in the second quarter when it posted earnings on Wednesday. The company reported that net income rose to $3.45 billion, or 79 cents a share, for the quarter. That compared with earnings of $3.11 billion, or 71 cents a share, in the year-ago period. Excluding certain one time items, Coke said it earned 60 cents a share, beating analysts’ estimates of 58 cents a share, according to Thomson Reuters. Coke has surpassed Wall Street’s expectations for six straight quarters now.

The company also reported that revenue fell 5 percent, coming in at $11.54 billion in the latest quarter. Analysts had expected $11.6 billion, on average. In the second quarter of 2015, Coke posted revenue of $12.16 billion.

The company cut its organic revenue forecast for the year, citing strong international headwinds. Coke cut its expectations to up 3 percent in 2016. Coke previously put its 2016 organic revenue growth at 4 percent to 5 percent. Coke also expects full-year earnings per share to fall 4 percent to 7 percent to a range of $1.86 to $1.92 a share, excluding items, versus the prior year’s EPS of $2. According Thomson Reuters, analysts were expecting Coke to earn $1.94 a share, on average. Shares fell as much as 3.4 percent after the announcement of the new forecast.

North America was the only region in which sales rose in the second quarter. Growth in Sprite, Fanta and energy drinks helped to offset a decline in Trademark Coca-Cola. While sparkling beverages declined 1 percent in the region, Coke’s portfolio of still beverages grew 3 percent in the quarter. Those still beverages include Dasani, Vitamin Water, Minute Maid and Powerade. Coke gained share in nonalcoholic ready-to-drink beverages in North America for the 25th consecutive quarter.

Higher sales in North America failed to make up for weakness in many of the company’s emerging and developing markets. CEO Muhtar Kent said in a statement, “Strong performance in some of our largest and most developed markets, including the United States, Mexico and Japan, was offset by difficult external conditions in many of our emerging and developing markets, including China and Argentina.” Global unit case volume was flat versus a year ago.

The Latin America region accounted for 9 percent of Coca-Cola’s total revenue in 2015. Today, some Latin American economies, including Venezuela, Brazil and Argentina, are facing high levels of inflation amidst political instability. Sales in the Asia region fell 2 percent on soft volume and slower sales growth in China. To address the issues in the region, the company plans to target rural areas with more affordable products, launch premium products in stronger markets and provide trade incentives to wholesalers.

 

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