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The Coca-Cola Company (KO - Free Report) has reported better-than-expected top-line results for fourth-quarter 2022, while the bottom line was in line with the Zacks Consensus Estimate. Earnings and sales improved year over year and surpassed our estimate in the quarter. The company’s results have benefited from the continued momentum in its business. KO has outlined its view for 2023.
Comparable earnings of 45 cents per share were in line with the Zacks Consensus Estimate and the year-ago period. Meanwhile, comparable earnings surpassed our estimate of 44 cents. However, unfavorable currency translations hurt comparable earnings by 11 percentage points. Comparable currency-neutral earnings per share rose 11% year over year.
Revenues of $10,125 million surpassed the Zacks Consensus Estimate of $10,005 million and improved 7% year over year. Revenues also beat our estimate of $9,603.7 million. Organic revenues rose 15% from the prior-year quarter. Coca-Cola’s top line benefited from strong revenue growth across its operating segments, aided by an improved price/mix and increased concentrate sales. Sales also benefited from a 1-point gain from one additional day in the quarter.
In the reported quarter, Coca-Cola gained a global value share in total non-alcoholic ready-to-drink beverages. The company benefited from underlying share gains in both at-home and away-from-home channels.
Coca-Cola’s shares jumped 1.1% in the pre-market trading session, owing to the better-than-expected fourth-quarter 2022 results. The Zacks Rank #2 (Buy) stock has lost 6.1% in the past year compared with the industry’s decline of 0.3%.
Image Source: Zacks Investment Research
Volume and Pricing
In the reported quarter, concentrate sales advanced 2% year over year, while the price/mix rose 12%. The price/mix benefited from pricing actions in the marketplace across all operating segments, coupled with a favorable channel and package mix. Price/mix also gained from a positive segment mix. In the quarter, concentrate sales were 3 points ahead of the unit volume due to an additional day and the timing of concentrate shipments.
Coca-Cola’s total unit case volume declined 1% in the fourth quarter, owing to the suspension of its business in Russia, which more than offset gains across Brazil, India, Great Britain and Mexico. Strength across all operating segments, ongoing investments in the marketplace and strength in the away-from-home channel were other positives. Volume for the developed markets improved in the low-single digits in the quarter, driven by strength across markets. Meanwhile, the developing and emerging markets declined in the low-single digits.
Coming to the category cluster performance, volume growth was even for sparkling soft drinks, driven by even sales for the trademark Coca-Cola, 9% growth for Coca-Cola Zero Sugar and a 2% decline in sparkling flavors. The sparkling soft drinks category benefited from the strong performances in Latin America and the Asia Pacific, offset by the suspension of business in Russia.
Volume for nutrition, juice, value-added dairy and plant-based beverages declined 7% in the fourth quarter. The category was primarily hurt by the suspension of the business in Russia, offset by strong growth in developed markets.
The water, sports, coffee and tea category were flat in the fourth quarter. Coca-Cola witnessed flat results for the water category as growth in Latin America was almost fully offset by declines in China, owing to the varying levels of pandemic-related mobility restrictions. Sports drinks rose 1% due to solid performances in Latin America, and Europe, Middle East and Africa. Tea volume was down 9%, as gains in Fuze Tea in Latin America were negated by the softness in dogadan in Turkey. The coffee business witnessed 11% growth on the cycling impacts of the closure of Costa retail outlets in the U.K. in the prior year and the expansion of Costa coffee across markets.
CocaCola Company (The) Price, Consensus and EPS Surprise
Revenues rose 25% for Latin America, 14% for North America, 3% for the Asia Pacific and 4% for Bottling Investments, while the same declined 7% for EMEA and 5% for Global Ventures.
Organic revenues improved 9% in EMEA, 32% in Latin America, 12% in North America, 15% in the Asia Pacific, 8% in Global Ventures and 16% in Bottling Investments.
Margins
In dollar terms, the operating income increased 24% year over year to $2,075 million, including a 10-point impact of currency headwinds. Comparable operating income rose 10.9% year over year. Comparable currency-neutral operating income advanced 21% on strong organic revenue growth across all segments, offset by higher operating costs and marketing investments.
The operating margin of 20.5% in the fourth quarter expanded 280 basis points (bps) from 17.7% in the prior-year quarter. The comparable operating margin expanded 60 bps to 22.7%, driven by higher operating revenues, offset by the impacts of the BODYARMOR acquisition, higher operating costs, elevated marketing investments and currency headwinds.
Guidance
Management has outlined its view for 2023. It anticipates organic revenue growth of 7-8% for 2023. Comparable revenues are expected to be impacted by a 2-3% currency headwind based on current rates. The guidance includes a 1% negative impact of acquisition and divestiture.
The company expects an impact of a mid-single-digit percentage from commodity price inflation on comparable cost of goods sold. The company anticipates an underlying effective tax rate of 19.5% for 2023.
Comparable currency-neutral earnings per share are estimated to increase 7-9%. The company anticipates year-over-year comparable earnings per share growth of 4-5%. Its comparable earnings per share growth is likely to include a headwind of 3-4% from currency and a slight headwind from acquisitions and divestitures.
For first-quarter 2023, comparable revenues are expected to include a 5-6% currency headwind and a 1% negative impact of acquisitions. Comparable earnings per share are estimated to include a currency headwind of 6-7%.
Management envisions an adjusted free cash flow of $9.5 billion for 2023, including $11.4 billion in cash flow from operations. Capital expenditure is likely to be $1.9 billion.
Other Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely Monster Beverage (MNST - Free Report) , Anheuser-Busch InBev (BUD - Free Report) and Brown-Forman (BF.B - Free Report) .
Monster Beverage currently has a Zacks Rank #2 and an expected long-term earnings growth rate of 11.4%. MNST has a trailing four-quarter negative earnings surprise of 7.5%, on average. The company has gained 13.6% in the past six months.
The Zacks Consensus Estimate for Monster Beverage’s current financial-year sales and earnings suggests growth of 11.4% and 1.7%, respectively, from the year-ago reported numbers. The consensus mark for MNST’s earnings per share has been unchanged in the past 30 days.
Anheuser-Busch InBev, alias AB InBev, currently has a Zacks Rank of 2. BUD has a trailing four-quarter earnings surprise of 8.8%, on average. It has a long-term earnings growth rate of 9.7%. The company has improved 8% in the past six months.
The Zacks Consensus Estimate for AB InBev’s current financial-year sales suggests growth of 7.2% from the prior-year reported number, whereas the same for earnings indicates a decline of 17.8%. The consensus mark for AB InBev's earnings per share has moved down 2.6% in the past 30 days.
Brown-Forman currently carries a Zacks Rank #2. BF.B has a trailing four-quarter earnings surprise of 8.9%, on average. The company has declined 14.3% in the past six months.
The Zacks Consensus Estimate for Brown-Forman’s current financial-year sales and earnings per share suggests declines of 1.8% and 13%, respectively, from the year-ago quarter. The consensus mark for BF.F’s earnings has been unchanged in the past 30 days.
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Coca-Cola (KO) Q4 Earnings Meet Estimates, Revenues Beat
The Coca-Cola Company (KO - Free Report) has reported better-than-expected top-line results for fourth-quarter 2022, while the bottom line was in line with the Zacks Consensus Estimate. Earnings and sales improved year over year and surpassed our estimate in the quarter. The company’s results have benefited from the continued momentum in its business. KO has outlined its view for 2023.
Comparable earnings of 45 cents per share were in line with the Zacks Consensus Estimate and the year-ago period. Meanwhile, comparable earnings surpassed our estimate of 44 cents. However, unfavorable currency translations hurt comparable earnings by 11 percentage points. Comparable currency-neutral earnings per share rose 11% year over year.
Revenues of $10,125 million surpassed the Zacks Consensus Estimate of $10,005 million and improved 7% year over year. Revenues also beat our estimate of $9,603.7 million. Organic revenues rose 15% from the prior-year quarter. Coca-Cola’s top line benefited from strong revenue growth across its operating segments, aided by an improved price/mix and increased concentrate sales. Sales also benefited from a 1-point gain from one additional day in the quarter.
In the reported quarter, Coca-Cola gained a global value share in total non-alcoholic ready-to-drink beverages. The company benefited from underlying share gains in both at-home and away-from-home channels.
Coca-Cola’s shares jumped 1.1% in the pre-market trading session, owing to the better-than-expected fourth-quarter 2022 results. The Zacks Rank #2 (Buy) stock has lost 6.1% in the past year compared with the industry’s decline of 0.3%.
Image Source: Zacks Investment Research
Volume and Pricing
In the reported quarter, concentrate sales advanced 2% year over year, while the price/mix rose 12%. The price/mix benefited from pricing actions in the marketplace across all operating segments, coupled with a favorable channel and package mix. Price/mix also gained from a positive segment mix. In the quarter, concentrate sales were 3 points ahead of the unit volume due to an additional day and the timing of concentrate shipments.
Coca-Cola’s total unit case volume declined 1% in the fourth quarter, owing to the suspension of its business in Russia, which more than offset gains across Brazil, India, Great Britain and Mexico. Strength across all operating segments, ongoing investments in the marketplace and strength in the away-from-home channel were other positives. Volume for the developed markets improved in the low-single digits in the quarter, driven by strength across markets. Meanwhile, the developing and emerging markets declined in the low-single digits.
Coming to the category cluster performance, volume growth was even for sparkling soft drinks, driven by even sales for the trademark Coca-Cola, 9% growth for Coca-Cola Zero Sugar and a 2% decline in sparkling flavors. The sparkling soft drinks category benefited from the strong performances in Latin America and the Asia Pacific, offset by the suspension of business in Russia.
Volume for nutrition, juice, value-added dairy and plant-based beverages declined 7% in the fourth quarter. The category was primarily hurt by the suspension of the business in Russia, offset by strong growth in developed markets.
The water, sports, coffee and tea category were flat in the fourth quarter. Coca-Cola witnessed flat results for the water category as growth in Latin America was almost fully offset by declines in China, owing to the varying levels of pandemic-related mobility restrictions. Sports drinks rose 1% due to solid performances in Latin America, and Europe, Middle East and Africa. Tea volume was down 9%, as gains in Fuze Tea in Latin America were negated by the softness in dogadan in Turkey. The coffee business witnessed 11% growth on the cycling impacts of the closure of Costa retail outlets in the U.K. in the prior year and the expansion of Costa coffee across markets.
CocaCola Company (The) Price, Consensus and EPS Surprise
CocaCola Company (The) price-consensus-eps-surprise-chart | CocaCola Company (The) Quote
Segmental Details
Revenues rose 25% for Latin America, 14% for North America, 3% for the Asia Pacific and 4% for Bottling Investments, while the same declined 7% for EMEA and 5% for Global Ventures.
Organic revenues improved 9% in EMEA, 32% in Latin America, 12% in North America, 15% in the Asia Pacific, 8% in Global Ventures and 16% in Bottling Investments.
Margins
In dollar terms, the operating income increased 24% year over year to $2,075 million, including a 10-point impact of currency headwinds. Comparable operating income rose 10.9% year over year. Comparable currency-neutral operating income advanced 21% on strong organic revenue growth across all segments, offset by higher operating costs and marketing investments.
The operating margin of 20.5% in the fourth quarter expanded 280 basis points (bps) from 17.7% in the prior-year quarter. The comparable operating margin expanded 60 bps to 22.7%, driven by higher operating revenues, offset by the impacts of the BODYARMOR acquisition, higher operating costs, elevated marketing investments and currency headwinds.
Guidance
Management has outlined its view for 2023. It anticipates organic revenue growth of 7-8% for 2023. Comparable revenues are expected to be impacted by a 2-3% currency headwind based on current rates. The guidance includes a 1% negative impact of acquisition and divestiture.
The company expects an impact of a mid-single-digit percentage from commodity price inflation on comparable cost of goods sold. The company anticipates an underlying effective tax rate of 19.5% for 2023.
Comparable currency-neutral earnings per share are estimated to increase 7-9%. The company anticipates year-over-year comparable earnings per share growth of 4-5%. Its comparable earnings per share growth is likely to include a headwind of 3-4% from currency and a slight headwind from acquisitions and divestitures.
For first-quarter 2023, comparable revenues are expected to include a 5-6% currency headwind and a 1% negative impact of acquisitions. Comparable earnings per share are estimated to include a currency headwind of 6-7%.
Management envisions an adjusted free cash flow of $9.5 billion for 2023, including $11.4 billion in cash flow from operations. Capital expenditure is likely to be $1.9 billion.
Other Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely Monster Beverage (MNST - Free Report) , Anheuser-Busch InBev (BUD - Free Report) and Brown-Forman (BF.B - Free Report) .
Monster Beverage currently has a Zacks Rank #2 and an expected long-term earnings growth rate of 11.4%. MNST has a trailing four-quarter negative earnings surprise of 7.5%, on average. The company has gained 13.6% in the past six months.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Monster Beverage’s current financial-year sales and earnings suggests growth of 11.4% and 1.7%, respectively, from the year-ago reported numbers. The consensus mark for MNST’s earnings per share has been unchanged in the past 30 days.
Anheuser-Busch InBev, alias AB InBev, currently has a Zacks Rank of 2. BUD has a trailing four-quarter earnings surprise of 8.8%, on average. It has a long-term earnings growth rate of 9.7%. The company has improved 8% in the past six months.
The Zacks Consensus Estimate for AB InBev’s current financial-year sales suggests growth of 7.2% from the prior-year reported number, whereas the same for earnings indicates a decline of 17.8%. The consensus mark for AB InBev's earnings per share has moved down 2.6% in the past 30 days.
Brown-Forman currently carries a Zacks Rank #2. BF.B has a trailing four-quarter earnings surprise of 8.9%, on average. The company has declined 14.3% in the past six months.
The Zacks Consensus Estimate for Brown-Forman’s current financial-year sales and earnings per share suggests declines of 1.8% and 13%, respectively, from the year-ago quarter. The consensus mark for BF.F’s earnings has been unchanged in the past 30 days.