Coca-Cola (KO, Financial) released its fourth-quarter 2020 earnings results on Feb. 10 before the market opened. While earnings edged past Refinitiv's consensus estimates, revenue missed projections slightly.
The company's shares were up 1.83% in premarket trading to $50.60 per share following the earnings announcement.
The key numbers
The Atlanta-based company posted adjusted earnings per share of 47 cents, which reflected a growth of 6% from the same period last year. The company cited its cost-cutting efforts as the reason for earnings growth. Revenue of $8.6 billion dropped 5% on a year-over-year basis as restaurants, bars, movie theaters and sports stadiums across the globe were shuttered on account of the Coronavirus pandemic. Analysts had predicted EPS of 42 cents on $8.36 billion in revenue.
Organic revenue, barring the impact of foreign currency, acquisitions and divestitures, shrank 3% as compared to the year-ago period.
CEO James Quincey said the following on the earnings report:
"The progress we made in 2020, including the actions taken to accelerate the transformation of our company, gives us confidence in returning to growth in the year ahead. While near-term uncertainty remains, we are well-positioned to emerge stronger from the crisis, driven by our purpose and our beverages for life ambition."
Segment performance
Global unit case volume plunged 3% during the quarter as declines in away from home sales, which account for nearly 50% of revenue, were only partially offset by elevated at-home demand. Away-from-home sales dropped in the mid-teens range during the quarter, which reflects a strong recovery from a mammoth 50% decline in April last year.
Unit case volumes for water, enhanced water and sports drinks dropped a combined 9%. Likewise, the volume for sparkling soft drinks was down 1%.
Geographically, sales dipped 1% in North America, 14% in Latin America and 5% in Asia-Pacific. Revenue in the Europe, Middle East and Africa segment tumbled 7% as compared to the prior-year quarter. Global Ventures' revenue plunged 14%, largely driven by the Costa retail store closures in Western Europe.
Strategic changes
The soda giant said it would reduce its number of brands by 50% to roughly 200 and focus on popular products that have sold well. Coca-Cola plans to streamline its beverage portfolio by discontinuing products like ZICO coconut water and Tab sodas.
Additionally, Coca-Cola has also resolved to job cuts to help streamline its business. The company said it has "convinced" about 4,000 employees to "voluntarily" give up employment in the U.S., Canada and Puerto Rico.
Looking forward
The company experienced unit case volume decline in only the mid-single digits globally through early February. The company therefore believes it is on track to bounce back in the quarters ahead given the easing of lockdowns as well as improvements in its away-from-home sales.
The company has issued a vague full-year 2021 financial forecast. Organic revenue is estimated to grow in the high-single digits range. Adjusted earnings are projected to rise between high single digits and low double digits, while free cash flow guidance is at least $8.5 billion. Capital spending is expected to reach roughly $1.5 billion.
Disclosure: I do not hold any positions in the stocks mentioned.
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