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Coca-Cola (KO) Advances on Q2 Earnings Beat, Higher Forecast
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The Coca-Cola Company (KO - Free Report) has reported second-quarter 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year. The company’s results have benefited from its continued business momentum, backed by its effective all-weather strategy. Driven by the strong results, KO has raised its view for 2024.
Coca-Cola has reported comparable earnings per share (EPS) of 84 cents in the second quarter, up 7% from the year-ago period. Comparable EPS also beat the Zacks Consensus Estimate of 80 cents. Unfavorable currency translations hurt the comparable EPS by 10 percentage points. Comparable currency-neutral earnings per share rose 17% year over year.
Revenues of $12.4 billion advanced 3% year over year and surpassed the Zacks Consensus Estimate of $11.9 billion. Organic revenues rose 15% from the prior-year quarter. Coca-Cola’s top line benefited from strong revenue growth across most of its operating segments, aided by improved price/mix and concentrate sales. In the reported quarter, Coca-Cola gained a global value share in the total non-alcoholic ready-to-drink beverages.
KO shares rose 1.7% following the strong second-quarter 2024 performance and upbeat view. The Zacks Rank #3 (Hold) stock has risen 5.2% in the past three months compared with the industry’s growth of 1.1%.
Image Source: Zacks Investment Research
Volume & Pricing
In the reported quarter, concentrate sales were up 6% year over year, whereas the price/mix improved 9%. The price/mix benefited from pricing actions in the marketplace and a favorable mix. In the quarter, concentrate sales were four points higher than the unit case volume, mainly driven by the timing of concentrate shipments.
Coca-Cola’s total unit case volume increased 2% year over year in the second quarter. The unit case volume for the developed markets was flat year over year. The volumes for the developing and emerging markets rose in the mid-single digits, driven by growth in India, Brazil and the Philippines.
Our model had predicted year-over-year organic revenue growth of 10.2% for the second quarter, with an 8.5% gain from the price/mix and a 1.7% increase in the concentrate sales volume.
CocaCola Company (The) Price, Consensus and EPS Surprise
Coming to the cluster-category performance, the unit case volume increased 3% year over year for sparkling soft drinks. The sparkling soft drinks category benefited from growth in Latin America and the Asia Pacific. The trademark Coca-Cola reported 2% growth in unit volumes, whereas Coca-Cola Zero Sugar advanced 6%, aided by growth in all geographic operating segments. Meanwhile, the sparkling flavors category rose 3% year over year, backed by growth in the Asia Pacific.
Volumes for juice, value-added dairy and plant-based beverages were up 2% in the second quarter, aided by growth in North America and the Asia Pacific.
Unit volumes for the water, sports, coffee and tea category were flat year over year in the second quarter. Coca-Cola witnessed a 1% volume dip in the water category, driven by declines in the Asia Pacific and North America, partly offset by growth in Latin America and EMEA. Sports drinks improved 3%, driven by gains in Latin America, EMEA and the Asia Pacific. The coffee business declined 4% due to a soft Costa coffee performance in the U.K. The tea volume rose 1%, backed by growth in the Asia Pacific and EMEA.
Segmental Details
Revenues rose 15% year over year for Latin America, 9% for North America, 1% for the Asia Pacific, and 2% each for EMEA and Global Ventures. However, revenues declined 16% for Bottling Investments.
Organic revenues improved 25% year over year in Latin America, 23% in EMEA, 9% in North America, 5% in the Asia Pacific, 1% in Global Ventures and 13% in Bottling Investments.
Margins
In dollar terms, the operating income rose 10% year over year to $2.6 billion, including a 16-point impact of currency headwinds. Comparable operating income rose 6.8% year over year to $4 billion. Comparable currency-neutral operating income advanced 18% on strong organic revenue growth across all segments, offset by higher marketing investments.
The operating margin of 21.3% in the second quarter expanded 124 basis points (bps) from 20.1% in the prior-year quarter. The comparable operating margin expanded 119 bps to 32.8%. The comparable currency-neutral operating margin expanded 246 bps to 34.1%.
Our model had predicted the second-quarter adjusted operating margin to expand 80 bps year over year to 32.4%, driven by 130-bps growth in the gross margin, offset by a 50-bps increase in the SG&A expense rate.
Guidance
Management has raised its view for 2024. It anticipates organic revenue growth of 9-10% for 2024 compared with an 8-9% rise mentioned earlier. Comparable net revenues are expected to include a 5-6% currency headwind based on current rates and hedge positions. The guidance also includes a 4-5% negative impact of acquisitions, divestitures and structural changes. The company anticipates an underlying effective tax rate of 19% for 2024.
Comparable currency-neutral EPS for 2024 is expected to increase 13-15% year over year compared with the previously mentioned 11-13% growth. The company anticipates comparable EPS to rise 5-6% year over year for 2024 versus the prior mentioned 4-5% jump.
Comparable EPS growth is expected to include headwinds of 8-9% from currency, and 1-2% from acquisitions, divestitures and structural changes. The company expects most currency headwinds to result from currency devaluation due to intense inflation.
Management envisions an adjusted free cash flow of $9.2 billion for 2024, including $11.4 billion in cash flow from operations. Capital expenditure is likely to be $2.2 billion.
For third-quarter 2024, comparable revenues are expected to include a 4% currency headwind, and a 4-5% negative impact of acquisitions, divestitures and structural changes. Comparable EPS is estimated to include an 8% currency headwind, and a 1-2% negative impact of acquisitions, divestitures and structural changes.
Stocks to Consider
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Vital Farms (VITL - Free Report) , Freshpet (FRPT - Free Report) and Philip Morris International (PM - Free Report) .
Vital Farms currently flaunts a Zacks Rank #1 (Strong Buy). VITL shares have risen 46.4% in the past three months. The company has a trailing four-quarter earnings surprise of 102.1%, on average. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Vital Farms’s current financial-year sales and earnings suggests growth of 22.6% and 64.4%, respectively, from the year-ago period’s reported figures.
Freshpet presently sports a Zacks Rank #1. FRPT shares have gained 14.4% in the past three months.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS suggests growth of 24.8% and 177.1%, respectively, from the year-ago period’s reported figures. FRPT has a trailing four-quarter earnings surprise of 118.2%, on average.
Philip Morris has a trailing four-quarter earnings surprise of 3.2%, on average. It currently carries a Zacks Rank #2 (Buy). PM shares have risen 8.3% in the past three months.
The Zacks Consensus Estimate for Philip Morris’ current financial-year sales and earnings suggests growth of 5% and 5.5%, respectively, from the year-ago period's reported figures.
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Coca-Cola (KO) Advances on Q2 Earnings Beat, Higher Forecast
The Coca-Cola Company (KO - Free Report) has reported second-quarter 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year. The company’s results have benefited from its continued business momentum, backed by its effective all-weather strategy. Driven by the strong results, KO has raised its view for 2024.
Coca-Cola has reported comparable earnings per share (EPS) of 84 cents in the second quarter, up 7% from the year-ago period. Comparable EPS also beat the Zacks Consensus Estimate of 80 cents. Unfavorable currency translations hurt the comparable EPS by 10 percentage points. Comparable currency-neutral earnings per share rose 17% year over year.
Revenues of $12.4 billion advanced 3% year over year and surpassed the Zacks Consensus Estimate of $11.9 billion. Organic revenues rose 15% from the prior-year quarter. Coca-Cola’s top line benefited from strong revenue growth across most of its operating segments, aided by improved price/mix and concentrate sales. In the reported quarter, Coca-Cola gained a global value share in the total non-alcoholic ready-to-drink beverages.
KO shares rose 1.7% following the strong second-quarter 2024 performance and upbeat view. The Zacks Rank #3 (Hold) stock has risen 5.2% in the past three months compared with the industry’s growth of 1.1%.
Image Source: Zacks Investment Research
Volume & Pricing
In the reported quarter, concentrate sales were up 6% year over year, whereas the price/mix improved 9%. The price/mix benefited from pricing actions in the marketplace and a favorable mix. In the quarter, concentrate sales were four points higher than the unit case volume, mainly driven by the timing of concentrate shipments.
Coca-Cola’s total unit case volume increased 2% year over year in the second quarter. The unit case volume for the developed markets was flat year over year. The volumes for the developing and emerging markets rose in the mid-single digits, driven by growth in India, Brazil and the Philippines.
Our model had predicted year-over-year organic revenue growth of 10.2% for the second quarter, with an 8.5% gain from the price/mix and a 1.7% increase in the concentrate sales volume.
CocaCola Company (The) Price, Consensus and EPS Surprise
CocaCola Company (The) price-consensus-eps-surprise-chart | CocaCola Company (The) Quote
Coming to the cluster-category performance, the unit case volume increased 3% year over year for sparkling soft drinks. The sparkling soft drinks category benefited from growth in Latin America and the Asia Pacific. The trademark Coca-Cola reported 2% growth in unit volumes, whereas Coca-Cola Zero Sugar advanced 6%, aided by growth in all geographic operating segments. Meanwhile, the sparkling flavors category rose 3% year over year, backed by growth in the Asia Pacific.
Volumes for juice, value-added dairy and plant-based beverages were up 2% in the second quarter, aided by growth in North America and the Asia Pacific.
Unit volumes for the water, sports, coffee and tea category were flat year over year in the second quarter. Coca-Cola witnessed a 1% volume dip in the water category, driven by declines in the Asia Pacific and North America, partly offset by growth in Latin America and EMEA. Sports drinks improved 3%, driven by gains in Latin America, EMEA and the Asia Pacific. The coffee business declined 4% due to a soft Costa coffee performance in the U.K. The tea volume rose 1%, backed by growth in the Asia Pacific and EMEA.
Segmental Details
Revenues rose 15% year over year for Latin America, 9% for North America, 1% for the Asia Pacific, and 2% each for EMEA and Global Ventures. However, revenues declined 16% for Bottling Investments.
Organic revenues improved 25% year over year in Latin America, 23% in EMEA, 9% in North America, 5% in the Asia Pacific, 1% in Global Ventures and 13% in Bottling Investments.
Margins
In dollar terms, the operating income rose 10% year over year to $2.6 billion, including a 16-point impact of currency headwinds. Comparable operating income rose 6.8% year over year to $4 billion. Comparable currency-neutral operating income advanced 18% on strong organic revenue growth across all segments, offset by higher marketing investments.
The operating margin of 21.3% in the second quarter expanded 124 basis points (bps) from 20.1% in the prior-year quarter. The comparable operating margin expanded 119 bps to 32.8%. The comparable currency-neutral operating margin expanded 246 bps to 34.1%.
Our model had predicted the second-quarter adjusted operating margin to expand 80 bps year over year to 32.4%, driven by 130-bps growth in the gross margin, offset by a 50-bps increase in the SG&A expense rate.
Guidance
Management has raised its view for 2024. It anticipates organic revenue growth of 9-10% for 2024 compared with an 8-9% rise mentioned earlier. Comparable net revenues are expected to include a 5-6% currency headwind based on current rates and hedge positions. The guidance also includes a 4-5% negative impact of acquisitions, divestitures and structural changes. The company anticipates an underlying effective tax rate of 19% for 2024.
Comparable currency-neutral EPS for 2024 is expected to increase 13-15% year over year compared with the previously mentioned 11-13% growth. The company anticipates comparable EPS to rise 5-6% year over year for 2024 versus the prior mentioned 4-5% jump.
Comparable EPS growth is expected to include headwinds of 8-9% from currency, and 1-2% from acquisitions, divestitures and structural changes. The company expects most currency headwinds to result from currency devaluation due to intense inflation.
Management envisions an adjusted free cash flow of $9.2 billion for 2024, including $11.4 billion in cash flow from operations. Capital expenditure is likely to be $2.2 billion.
For third-quarter 2024, comparable revenues are expected to include a 4% currency headwind, and a 4-5% negative impact of acquisitions, divestitures and structural changes. Comparable EPS is estimated to include an 8% currency headwind, and a 1-2% negative impact of acquisitions, divestitures and structural changes.
Stocks to Consider
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Vital Farms (VITL - Free Report) , Freshpet (FRPT - Free Report) and Philip Morris International (PM - Free Report) .
Vital Farms currently flaunts a Zacks Rank #1 (Strong Buy). VITL shares have risen 46.4% in the past three months. The company has a trailing four-quarter earnings surprise of 102.1%, on average. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Vital Farms’s current financial-year sales and earnings suggests growth of 22.6% and 64.4%, respectively, from the year-ago period’s reported figures.
Freshpet presently sports a Zacks Rank #1. FRPT shares have gained 14.4% in the past three months.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS suggests growth of 24.8% and 177.1%, respectively, from the year-ago period’s reported figures. FRPT has a trailing four-quarter earnings surprise of 118.2%, on average.
Philip Morris has a trailing four-quarter earnings surprise of 3.2%, on average. It currently carries a Zacks Rank #2 (Buy). PM shares have risen 8.3% in the past three months.
The Zacks Consensus Estimate for Philip Morris’ current financial-year sales and earnings suggests growth of 5% and 5.5%, respectively, from the year-ago period's reported figures.