The U.S. multinational beverage corporation Coca-Cola (KO, Financial) posted fourth quarter earnings on Friday that surpassed estimates both in terms of earnings and revenue.
Looking back, the company’s sales have been declining over the past several quarters due to feeble demand in budding and developing markets due to shifts in consumer preferences. As far as this quarter is concerned, profits topped analysts’ expectations, thanks to a growing beverage portfolio and reformulations.
Diving into the numbers
Coca-Cola’s adjusted earnings per share for the quarter were 39 cents per share, which was 1 cent more than what was expected. Quarterly revenue stood at $7.51 billion versus $7.37 billion projected.
By contrast, the beverage giant reported a GAAP net loss of $2.75 million or 65 cents a share, which was down from net income of $550 million or 13 cents a share reported in the same period last year. Organic sales during the quarter grew 6% year-over-year while the same grew 3% for the whole year. Owing to the new U.S. tax laws, Coca-Cola had to incur a one-time tax charge of $3.6 billion during the fourth quarter.
Bird’s-eye view
The beverage behemoth saw tremendous growth in developed markets such as Europe and North America, owing to strong performance at the recently refranchised regions, higher prices and improved packaging.
The company’s CEO James Quincey has had an important role to play in the company’s development since he took the helm. Coca-Cola has heavily invested in Honest Tea, Fairlife dairy and Suja Life LLC, which makes high-pressure processed juices and drinking vinegar. Coca-Cola has therefore become a beverage company with a broad brand portfolio. In fact, the company is looking for investment opportunities beyond its home market, such as in Central and Eastern Europe.
Coca-Cola also said it would bring back its biggest seller, Diet Coke. Despite its unimpressive sales, the company remains hopeful of its strong comeback as it plans to modify the flavor and enhance its packaging.
The company said it has all it takes to drive revenue in the future. Recently launched brands such as Coca-Cola Zero Sugar, FUZE Tea, AdeS plant-based beverages and smartwater will help the company drive 4% organic revenue growth.
Coca-Cola is also taking steps towards its e-commerce initiative. This will bring in several challenges for the beverage behemoth like improving online product placement and making apt use of Amazon.com’s Echo.
Guidance for 2018
As far as this year is concerned, the company expects organic revenue to grow to 4% while it projects comparable earnings per share to grow 8-10%. Coca-Cola expects operating cash flows to be at least $8.5 billion and operating income to grow 8-9%. The company plans to make capital spending of $1.9 billion, a larger chunk of which will go towards augmentation of digital capabilities.
Disclosure: I do not hold any position in the stock mentioned in this article.
