Coca-Cola (KO) had a better-than-expected third quarter as consumers remained picky with their money.
On Wednesday morning, the soda giant reported sales of $11.9 billion, beating expectations for $11.61 billion but down from $12 billion a year earlier. Adjusted earnings were $0.77 per share, beating expectations of $0.74.
“There are some parts of the world where consumers have remained fairly resilient,” Chief Financial Officer John Murphy told Yahoo Finance on the phone, adding that Coca-Cola is “remaining quite resilient” in developed markets. I am benefiting from it.”
“On the positive side, we’ve seen that spending is picking up and that some of the factors that will drive sentiment going forward, such as employment rates, are trending in a positive direction,” Murphy said. There are still many uncertain variables, but at the root of it all: [consumers] Continue spending. ”
The company reported a 10% increase in organic revenue for the full year, with price increases helping to counter factors such as continued pressure from cautious consumers, lower commodity costs and more challenging trends in international markets. I predict that will happen.
“The bar to earnings is high,” JPMorgan analyst Andrea Teixeira said in a note to clients, adding that “while headlines were stronger and there were some guidance increases…most of the positive surprises… , due to a better-than-expected price mix, but volumes were softer.
Sales were flat in North America, while global sales fell 1% due to slowdowns in China, Mexico and Turkey. Consumers in China have been under pressure since the coronavirus outbreak, but Coke sees bright spots next year as the government announces further economic stimulus, Murphy said.
Coca-Cola shares fell 2% in premarket trading after the report was released.
Rival PepsiCo (PEP) revised its 2024 sales outlook in early October after third-quarter North American and international sales fell short of Wall Street expectations.
PepsiCo CEO Ramon Laguarta said in a phone interview with Yahoo Finance that consumers are facing “extreme challenges” and are making “a lot of trade-offs” when it comes to food. spoke. According to La Guarta, these trade-offs are affecting the snack industry most severely.
Ahead of the results, Teixeira wrote that consumers, especially in the United States, “have less money in their hands and more choices.” This forced Coca-Cola to raise prices to maintain growth.
“Coca-Cola is deploying revenue growth management capabilities to offer both single-serve in convenience and gas channels and multi-serve price points in large-format stores,” Teixeira wrote. She pointed to a single-serve 20-ounce example. It’s now $2.69, up from $2.25, compared to $1.99 previously.
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“We talk about revenue growth management all the time,” Murphy says. “At the root of this is the ability developed around the world to work backwards from the consumer and build an architecture for channel-specific pricing packages that hit the sweet spot.”
Fast food chains like McDonald’s (MCD), Burger King (QSR), and Taco Bell (YUM) are trying to increase customer traffic with great deals and meal sales. Coca-Cola reportedly played a role in McDonald’s $5 meal sets.
“We’ve had a pretty good response to offering more of a value proposition” for U.S. QSRs, Murphy said.
Coca-Cola executives have focused particularly on the cost of eating at home and eating out for low- to moderate-income people.
According to the Consumer Price Index, the cost of groceries rose 1.3% in September compared to the same month last year, while the cost of eating out rose 3.9%. Teixeira said Coke is working with grocers to navigate the environment. One of the initiatives is to “commercialize rotisserie chicken at an affordable price.” [2 liter] Even if you use a bottle, you will still save a lot of money compared to eating out,” she said.
The company is also dabbling in alcohol. Deutsche Bank analyst Steve Powers said he expected the company to have “some focus” on “further developing the beverage alcohol market.” Coca-Cola plans to launch Barcardi rum and cola cocktails in European markets and Mexico next year.
Since the beginning of the year, Coca-Cola’s stock has risen more than 18%, lagging the S&P 500 index (^GSPC)’s 22% rise but outpacing PepsiCo’s 2.5% rise.
Below is a look at what Coca-Cola reported in the third quarter compared to the Bloomberg consensus forecast.
Revenue: $11.9 billion vs. $11.61 billion
Adjusted earnings per share: $0.77 vs. $0.74
Price/Mix: 10% vs. 6.51%
Unit case volume increase: -1% vs. +0.42%
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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