Interactive Investor

ii view: Warren Buffett favourite Coca-Cola sales forecasts beat estimates

Shares for this global brand name are up close to a third over the last five years. Buy, sell, or hold?

13th February 2024 15:50

Keith Bowman from interactive investor

Fourth-quarter results to 31 December  

  • Revenue up 7% to $10.8 billion
  • Adjusted earnings up 10% to $0.49 per share
  • Quarterly dividend payment of $0.46 per share, unchanged from the previous quarter

Guidance: 

  • Expects to deliver full year 2024 organic revenue growth of 6% to 7%

Chief executive James Quincey said:

“During the year, our people and partners rose to meet new challenges, allowing us to excel globally and deliver in a dynamic world. As we begin a new year, we’re confident that our all-weather strategy, powerful portfolio and harmonised system will continue to create value for our stakeholders in 2024 and for the long term.”

ii round-up:

Drinks giant Coca-Cola Co (NYSE:KO), a longstanding holding of legendary investor Warren Buffett, today offered 2024 sales growth hopes ahead of Wall Street expectations.

Coca Cola, whose brands also include Fanta and Costa coffee, detailed a 6% gain in 2023 revenues to $45.8 billion. Sales for the year ahead are expected by management to grow by between 6% and 7%, ahead of analyst forecasts of 5.9%. 

Shares for the Dow Jones company rose marginally in post results trading having come into this latest news down by 1.5% over the last year. That’s better than a 4% decline for arch-rival PepsiCo Inc (NASDAQ:PEP), although in contrast to a 13% improvement for the Dow Jones index itself.

Coca Cola sells its many brands including Sprite and Innocent in more than 200 countries and territories around the world. Product price increases made over 2023 have been countering higher costs such as those for energy and ingredients.

Fourth-quarter sales up 7% year-over-year to $10.8 billion helped push adjusted earnings up 10% to $0.49 per share.  

Coca Cola previously declared a quarterly dividend of $0.46 per share, unchanged from the prior quarter. The Atlanta headquartered company has upped its annual dividend payment for more than 30 consecutive years.  

First-quarter results are likely to be announced mid-to-late April.

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 next at almost 18% and its investments in bottling partners contributing a significant 17%. 

For investors, a fall in volumes for categories including water and tea & coffee during this latest quarter in its core North American market should not be overlooked. Costs for businesses generally remain elevated. Geopolitical tensions previously caused it to exit Russia, while the sizeable proportion of its sales made overseas regularly encounter currency related headwinds. 

On the upside, both product and geographical diversity are high. Product price rises have been helping to counter increased costs. Market share gains continue to be made, while a progressive dividend policy and a forecast yield of just over 3% are not to be ignored. 

On balance, and despite ongoing risks, this mammoth 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

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