ii view: Coca-Cola beats Wall Street forecasts

Second-quarter results to 30 June  

• Revenue up 3% to $12.4 billion
• Adjusted earnings up 7% to $0.84 per share
• Quarterly dividend payment of $0.485 per share, unchanged from the previous quarter

Guidance: 

• Now expects full-year organic revenue growth of 9-10%, up from a previous 8-9%
• Now expects full-year adjusted earnings per share growth of 5-6%, up from a previous 4-5%

Chief executive James Quincey said:

“We are encouraged with our second quarter results, which delivered solid topline and operating income growth in an ever-changing landscape.”

“Together with our bottling partners, we continue to execute our highly effective all-weather strategy, and we are confident in our ability to deliver on our raised 2024 guidance and longer-term objectives.”

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ii round-up:

Soft drinks giant Coca-Cola Co (NYSE:KO) today detailed sales and adjusted earnings that beat Wall Street forecasts.

Second-quarter sales to the end of June rose 3% year-over-year to $12.4 billion, driving adjusted earnings up 7% from a year ago to $0.84 per share. Coca-Cola, whose brands also include Fanta and Costa coffee, now expects growth in annual sales of 9-10%, up from a previous 8-9%. Full-year adjusted earnings are forecast to grow by between 5% and 6%, up from a prior 4% to 5% estimate. 

Shares in the Dow Jones company rose 1% in post results trading having come into this latest news up by a tenth year-to-date. That’s compares to a 1% decline for arch-rival PepsiCo Inc (NASDAQ:PEP) during that time. The Dow Jones itself is up almost 7% in 2024.

Coca-Cola sells its many brands including Sprite and Innocent in more than 200 countries and territories around the world.

Global unit case volumes rose 2% year-over-year. Volume growth of 5% in Latin America contrasted with a 1% fall for its home North American market.  

Volume growth aided a rise in the operating profit margin to 21.3% during the period, up from 20.1% in the second quarter of 2023. A refranchising of bottling operations also assisted, countered by increased marketing spend and currency headwinds.

The Atlanta headquartered company previously declared a quarterly dividend of $0.485 per share, unchanged from the prior quarter. 

Third-quarter results are likely to be announced mid-to-late October.

ii view:

Started in 1886, Coca-Cola sells its 200 drink brands across categories including carbonated soft drinks, water, sports, energy, juice, and coffee. Together with its bottling partners, it employs more than 700,000 people. Its home North American market remains it biggest sales generator at around 36%, with Europe, the Middle East and Africa coming in at around 16% and Latin America almost 13%. 

For investors, a fall in volumes for categories such as water in North America should not be overlooked. Geopolitical tensions previously caused it to exit Russia, costs for businesses generally remain elevated, while the sizeable proportion of its sales made overseas regularly encounter currency related headwinds. 

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More favourably, both product and geographical diversity are high and product price rises have been helping to counter increased costs. Market share gains continue to be made, while more than 30 years of consecutive annual dividend increases and forecast income yield of around 3% underline its focus on shareholder returns. 

In all, and despite ongoing risks, this giant of the beverage world looks to continue justifying its place in many already diversified investor portfolios.  

Positives: 

• Brand strength
• Progressive dividend policy

Negatives:

• Elevated costs
• Heightened geopolitical tensions

The average rating of stock market analysts:

Buy