WHAT YOU NEED TO KNOW
  • Coca-Cola raised its full year comparable earnings forecast to growth of at least 11%, its third consecutive quarterly outlook increase.
  • Adjusted earnings reached 91 cents per share, beating the 88 cents expected, while revenue rose 7% to $13.4 billion.
  • Global unit case volume increased 5%, but North American volume remained flat amid pressure on consumers and restaurants.
  • Shares fell less than 1% as management projected little change in consumer behavior through 2027.

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Coca-Cola raised its full year earnings outlook for the third consecutive quarter on Tuesday after beating Wall Street expectations for adjusted earnings and revenue. The stronger forecast arrived even as demand in North America remained lackluster.

The beverage giant now expects comparable earnings per share to grow at least 11% for the full year. Its previous forecast called for growth of 9% to 10%, marking a clear upgrade to the company’s outlook.

Coca-Cola also expects organic revenue to increase at least 5%. The company previously projected organic revenue growth of approximately 5%.

CEO Henrique Braun credited the results to the company’s “speed and discipline” despite the “uneven environment,” during Coca-Cola’s earnings conference call. The performance gave the company room to improve its forecast despite continued pressure in its home market.

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For the fiscal third quarter, Coca-Cola reported net income attributable to shareholders of $4.01 billion, or 93 cents per share. That compared with $3.7 billion, or 86 cents per share, a year earlier.

After excluding transaction gains and other items, Coca-Cola earned 91 cents per share. Wall Street analysts surveyed by LSEG had expected adjusted earnings of 88 cents per share.

Net sales increased 7% to $13.4 billion, exceeding the $12.92 billion expected by analysts. Organic revenue, which excludes acquisitions, divestitures and foreign currency effects, also climbed 7% during the quarter.

Unit case volume increased 5% for the second consecutive quarter, supported by stronger demand outside North America. Volume in Coca-Cola’s home market was flat.

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CFO John Murphy told CNBC that North American volume would have grown if not for the timing of the Fourth of July holiday and a monthslong shortage of Topo Chico. Coca-Cola owns the sparkling water brand.

“The underlying momentum remains quite strong,” Murphy said. “Consumer sentiment is largely unchanged in the sense that, wherever you are on the income scale, you’re looking for value, and I think our system here has done a good job interpreting that.”

Coca-Cola’s North American business serving consumers at home performed better than its business serving restaurants, movie theaters and amusement parks. Murphy told analysts that the restaurant industry remained under pressure and said Coca-Cola expected those conditions to continue through the rest of the year.

Company executives have said North American consumers are being stretched by inflation and economic uncertainty. Shoppers are seeking value, although Coca-Cola has also said consumers continue purchasing beverages ranging from premium Fairlife products to its namesake soda.

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Looking toward 2027, Coca-Cola expects consumer behavior to remain unchanged, Murphy said. Shares fell less than 1% in morning trading as the company offered a gloomy view of the consumer environment.

Globally, volume in Coca-Cola’s sparkling soft drinks business rose 5% during the quarter. Growth came from Coke, Coke Zero Sugar and Diet Coke.

Murphy told CNBC that Diet Coke was experiencing a “resurgence.” Gen Z consumers in the U.S. have nicknamed the drink a “fridge cigarette,” while consumers in India held Diet Coke parties as shortages linked to the war involving the U.S., Israel and Iran made the beverage scarce.

“It’s a brand that’s almost reinventing itself with the next generation of consumers,” Murphy said. He also said Coca-Cola had gained market share while rival PepsiCo struggled with its soda business, although brands such as Sprite still had “some work to do.”

Volume in Coca-Cola’s water, sports, coffee and tea division increased 5%, driven by stronger demand for water products that include premium Smartwater. Tea and coffee demand was flat, while sports drink volume declined.

The company’s juice, value added dairy and plant based beverage division reported flat volume. That result came despite growth from brands including Fairlife and Minute Maid.

The quarterly figures left Coca-Cola with higher sales, stronger adjusted earnings than analysts expected and another forecast increase. At the same time, flat North American volume and continued restaurant industry pressure showed why management remains cautious about consumer demand.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.