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James Li
James Li
Articles (866)  | Author's Website |

Buffett’s Favorite Drink Coca-Cola Soars on Increased Revenue Guidance

Beverage giant reports strong revenue performance during the June quarter yet still has long-term revenue decline

July 23, 2019 | About:

Coca-Cola Co. (NYSE:KO), one of Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B)'s largest holdings, said on Tuesday that second-quarter revenue increased 6% from the prior-year quarter, driven by strong organic revenue growth across key businesses and regions during the first six months of the year.

For the quarter ending June 30, the Atlanta-based beverage giant reported earnings of 61 cents per share based on generally accepted accounting principles and adjusted earnings of 63 cents per share, outperforming the consensus estimate of 61 cents per share according to Refinitiv.

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Company accelerates performance across key businesses and regions

Coca-Cola CEO James Quincey said that the company’s strategy to “transform as a total beverage company” has allowed it to continue winning in a “growing and vibrant industry.” Quarterly net revenues of $10 billion outperformed the consensus estimate of $9.9 billion and increased 6% year-over-year, with concentrate sales rising 4%.

Quincey mentioned during the earnings call that strong growth across the company’s businesses and regions drove organic revenue growth over the first half of the year, including 4% in Asia Pacific; 9% in Europe, the Middle East and Africa; and 7% in Latin America.

Retail sales in North America increased 6% on several factors, including improving marketing and consumer demand for zero-sugar products. Coca-Cola Zero Sugar had double-digit volume growth globally over the past seven quarters.

Shares rise on increased full-year revenue guidance yet long-term revenue still declines on average

Shares of Coca-Cola increased approximately 5% at market open as the company increased its full-year revenue and operating income guidance from the prior quarter. Quincey now expects organic revenues to grow 5%, compared to prior guidance of 4%. The company also increased expected full-year operating income growth by 1% to a range between 11% and 12%.

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GuruFocus ranks Coca-Cola’s profitability 5 out of 10: Although the company’s profit margins and returns are outperforming over 93% of global competitors, Coca-Cola’s revenue has declined over the long term. Revenues have fallen approximately 10% on average over the past three years and 6.7% on average over the past five years.

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Warren Buffett (Trades, Portfolio)’s conglomerate has not yet released its second-quarter portfolio as the deadline is 45 days after quarter-end. Berkshire owns 400 million shares as of the first quarter. On Tuesday, shares reached an intraday high of $54.22 during the morning, up 5.81% from Monday’s close of $51.24 and 15.92% from the first-quarter average price.

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Other gurus with large holdings in Coca-Cola include Yacktman Asset Management (Trades, Portfolio), Yacktman Fund (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio).

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Disclosure: No positions.

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About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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