The Coca-Cola Company (KO) on Q1 2021 Results - Earnings Call Transcript
Operator: At this time, I'd like to welcome everyone to the Coca-Cola Company's First Quarter Earnings Results Conference Call. Today's call is being recorded. I would like to remind everyone that the purpose of this conference is to talk with investors and therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's media relations department if they have any questions. Tim Leveridge: Good morning and thank you for joining us today. I'm here with James Quincey, our Chairman and Chief Executive Officer; and John Murphy, our Chief Financial officer. Before we begin, please note that we posted schedules under the Financial Information tab in the investors section of our company website at www.coca-colacompany.com. These schedules reconcile certain non-GAAP financial measures which may be referred to by our senior executives during this morning's discussion, to our results as reported under generally accepted accounting principles. You can find schedules in the same section of our company website that provide an analysis of gross and operating margins. In addition, this conference call may contain forward-looking statements including statements concerning long-term earnings objectives and should be considered in conjunction with cautionary statements contained in our earnings release and in the company's most recent periodic SEC report. Following prepared remarks this morning, we'll turn the call over to your questions. Please limit yourself to one question. If you have more than one, please ask your most pressing question first and then re-enter the queue. Now I'd like to turn the call over to James. James Quincey: Thanks, Tim, and good morning, everyone. In what remains a highly dynamic environment, our first quarter results show promising signs that a broader recovery is on the horizon. We're encouraged by early results in markets where mobility is on the rise. This morning, I'll share what we're seeing around the world and provide an update on the actions we've taken to accelerate our transformation, including improvements in our portfolio, innovation, and marketing approaches enabled by the evolution of our culture and our network organization. Then, I'll hand over the call to John to discuss the financial details of the quarter, and how we'll continue to deliver on our objectives over the course of the year. In the first quarter, we positioned our business to recovery while executing against our emerging stronger agenda, equipping our system to win. At the start of the year, pandemic-related lockdowns were still impacting many markets. We moved quickly as conditions changed, improving along the way and getting better at managing each wave and its resulting lockdowns. During the quarter, we saw mobility increase in some parts of the world where lockdowns eased and vaccinations accelerated. Leveraging our learnings, we drove sequential improvement in our business throughout the quarter. And while we saw mid-single-digit volume declines through mid February, trends have improved since then. We're pleased to say that March marked a return to volume levels seen in March 2019 prior to the pandemic. John Murphy: Thank you, James. And good morning to everybody on the call. Today, I will highlight our first quarter performance and go over our top line and earnings guidance which we are reiterating. Then I'll provide a progress update on working capital, our ability to manage through the current commodity environment, and other factors that may impact our outlook. 2021 is off to a good start with the quarter showing steady sequential monthly improvement. We're leveraging our learnings and strategic initiatives from 2020 and leaning into growth in a thoughtful way. Operator: Our first question comes from the line of Dara Mohsenian with Morgan Stanley. DaraMohsenian: Hey, guys. So clearly top line growth in Q1, and it recovered to a greater extent than the market expected. You guys mentioned a good start to the year with sequential improvement. So, I guess, a, can you just discuss volume trends in March in markets where restrictions have loosened and mobility has picked up such as the US, maybe contrast that with the markets where restrictions are still in place and what that portends going forward? And then, b, totally understand it's a very fluid environment. But with March volume already back to 2019 levels with the topline upside in the quarter, can you just help me understand the unchanged full-year topline outlook? And is it just that it's early given the volatility and we only have one quarter in the books to become more positive on the full year? Just sort of trying to understand your mindset on the full year revenue guidance relative to the Q1 upside. Thanks. JamesQuincey: Sure. Thanks Dara. So firstly, the first quarter was strong. Absolutely, we gained momentum and we achieved that good momentum in the first quarter, which is really the fruition of the emerging stronger plan we set out a year ago, saying we wanted to get back to 2019 levels well ahead of the economy by gaining more share, more customers, better system economics. And I think that's what you're starting to see happen in the first quarter. And obviously, we've been driving that by focusing on the brands and on the innovation. And the bottlers have been executing in the marketplace, and it's certainly heartening to see us get back to 2019 volume levels in March. And we did all of that whilst doing -- finishing the implementation of the reorganization, sothe employees on the company side were able to both deliver the results and stand up the new organization with the operating units and platform services and really hit the ground running. So, I think it is actually a super creditable performance in the first quarter. Secondly, the downhill and the question about guidance. I mean, ultimately, it's early and it's not early, just in a normal sense, it’s early in the context of the pandemic. Also, breaking the news today is that weekly new cases of COVID have hit an all-time peak. So while vaccinations are rising in many countries, US, UK, et cetera, the flipside is there's actually a new high in terms of cases, obviously a number of developing markets but also Europe as well continental Europe as well. So, the visibility into the downhill is very much linked to the trajectory of the pandemic, and as it relates to our business, the trajectory of the lockdowns, very clearly as we've talked on previous quarters, lockdowns because we have half our business in away from home are impacted directly by the degree of lockdown, and though there are still lockdowns coming on, a number in Europe, some of the developing markets, conversely as markets start to open, it's worth remembering. It's not an on/off switch. There’s a phasing of how markets tend to reopen. And that's true to the US, so for example in the US, the fountain volumes were still negative in March because whilst people are going out to restaurants and there's more mobility, it's not back to what it was. The occupancy levels of offices are nowhere near a 100%, and so reopening is not an on/off switch. There's a rebuilding and there's a series of phases of reopening. And so, that's a very important factor and it's somewhat unpredictable with the downhill. So it's too early to call not in a business sense, but in a lockdown and reopening sense. And the reality is that there are more cases now than they were a while ago. So, we still feel very confident in our guidance on the top and the bottom line, but there's a lot of managing left to do and we’re certainly focused on giving ourselves the flexibility and agility to be able to do that. And which leads me to my third point, which I think is worth making. Unlike normal times, one should not automatically assume that more revenue is always going to flow straight down to the bottom line. Much as we did in 2020, we are going to be very judicious and focused on investing where we believe reopening and demand is coming back and not investing, if we don't think the response in the marketplace is there. So you're going to see as we go through 2021, we will be looking at both levers. If we see that demand is coming in at the kind of the higher end, there's more reopenings happen more quickly for whatever reason, and revenue start to accelerate, we’re also likely to reaccelerate the restitution of the marketing spend. Conversely, if for whatever reason revenue starts to look a little weaker, then we are likely to hold back on some of the marketing. So, I think it's important as you think about the rest of the year that you don't think of it as normal times one has to think about how we are using the resources judiciously and wanting to invest to drive growth and get back to normal. Operator: Your next question comes from the line of Bryan Spillane with Bank of America. BryanSpillane: Hey, thank you, operator. Good morning, everyone. John, I wanted to pick up on some of the comments you made relative to inflation, and I guess kind of thinking about it past '21 and into '22, just given the recent trends, which have elevated pretty meaningfully across a lot of inputs really across our whole coverage universe. If that stays in effect for '22, can you talk a little bit about what you can do working with the system with the bottlers to try to manage that inflation, and really beyond revenue management? So just how much, what type of actions can you take in terms of procurement, maybe finding inefficiencies that exist between the Coca-Cola company and the bottling systems, just really trying to understand, in a scenario where inflation stays meaningfully elevated in a way that we haven't seen in a real long time, just what types of things you can contemplate to try to help the system manage that inflation. JohnMurphy: Thank you, Bryan. Good morning. Good topic. And one that with our bottling partners around the world, we're looking as a very holistic manner, managing inflation is not new to the system. And it's one it's an area that needs to be looked us locally and working closely in partnership with our bottlers. As you're saying the inflationary pressures, particularly surrounding some of our key commodities, looks like it is going to be more of a headwind in '22, '21 we are, as we said, in the release pretty well covered and in good shape. And so when you think about the actions we take, first and foremost, I think it is important to highlight that as an over arching principle around the world, we typically look to take pricing in line with inflation. And I would expect that principle will continue to be adhere to as we move into the back half of '21, and even then into '22. Secondly, while, I know you mentioned beyond RGM, I do think it's important to reinforce the value that RGM brings to being able to execute a pricing strategy in the most relevant and meaningful fashion locally. And so that will continue to be a key priority. Thirdly, on the things that we can do on the productivity area, I would point to our supply chain particularly with our bottling partners in the last 6 to 12 months coming through the pandemic and indeed coming out of us that the level of engagement we've had with our -- within the system unlocking value in the supply chain through greater efficiencies, has been phenomenal. And I would expect that momentum to continue into the rest of this year and into 2022. We have had over the last number of years, the benefits of leveraging our cross enterprise procurement group, a group of people that work on behalf of the entire system around the world that are able to leverage the global scale of the system. And I think arrive us some of the most competitive pricing that we can get that anybody can get when it comes to key inputs. So when you take a sort of an overarching holistic view of us, we've got a, I think, a tried- and-true practice of being able to take pricing enlightenment and inflation leverage RGM to do it in the most intelligent fashion, and increasingly operate as a global system to leverage our scale, taking into account some of the sort of the historic groups we have like cross enterprise procurement, but also new opportunities abounding as a result of the overall strategy we've been pursuing during and after the pandemic. Operator: Your next question comes from the line of Nik Modi with RBC Capital Markets. NikModi: Thank you. Good morning, everyone. James, I was hoping you could provide some tangible examples of how the company's new decision making infrastructure is manifested in better outcomes, generally, and maybe just kind of contrast that to what those decisions would have looked like under the older model. Thank you. JamesQuincey: Sure, Nik, a few examples. One, I think John's already mentioned, the cash flow, we struggle for many years to get up into best-in-class cash conversion, or working capital. And the work that has been done by the finance network has produced a great result. And that's clearly flowing through not just in terms of the kind of theoretical, amount of days working capital, but the actual cash coming into the company in the first quarter, which was a really strong result, and then something that we have struggled to do in the past. Another example with -- we have been rolling out a global campaign on Sprite, which has got excellent early traction, in terms of consumer engagement, in terms of purchase intent. And that was developed by the category leads and the key operating units, and has been rolled out across the world, something that we were unable to do or unable to convince ourselves to do historically. And so we believe that is making some cut through. The supply chain optimization working with the bottlers and really focusing on reducing the unit cost of what we do and looking at across all the metrics, and increasing data transparency is happening. And then you go to some of the platform services, where we're really starting to be able to implement, especially in those areas, where one single global solution makes total sense. We've had examples from, buying trade materials, through global platforms driving significant savings for ourselves and the system. And then hopefully, later this month, we'll turn on our latest SAP update, which will go from the one that was done 20 years ago, which was probably one of the world's most complicated and therefore most expensive to a much more effective solution. So I think across the company, from the front end of marketing, and engaging with consumers, through our operations through to the bottlers we're able to make the contact points and get faster, better solutions. Operator: Your next question comes from the line of Lauren Lieberman with Barclays. LaurenLieberman: Great, thanks so much. Good morning. And this is probably a good lead in from all three of the last questions. But I want to talk a little bit about profitability because it was interesting to me that I think margins in almost every division outside of EMEA were comfortably ahead of where they were in the first quarter of 2019. And knowing that COVID comps weren't necessarily a dynamic for all regions in the first quarter of last year, if I still benchmark back to '19, the profitability improvements are significant. And so I was curious, how much knowing James your comments and wanting to invest to support recovery is a very important dynamic. But how much do you think of that margin improvement that we're seeing. So, at this point is tied to these broad range of cost management initiatives across the board and RGM, inclusive, versus timing of marketing, the need to put back in and continue funding the business, and it may be different region to region, of course, as well. Thanks. JamesQuincey: Yes. Thanks, Laura, look, clearly, the reinvestment of marketing is going to vary somewhat by region in 2021 for the reasons I outlined in that answer to the first question. So I think it's important as you think about margins to recognize that 2021 is also going to be a somewhat a typical year, there will be markets around the world where we judge the situation such that we don't have a normal level of marketing. And so that does tend to favor margins, operating margins at that point in time. And so it is important to break it apart and look at it by the different regions. We certainly are not coming out with some numerical margin target for many of the same reasons that we remove the previous target. And we are focused ultimately on growing the business. And embedded in our long-term growth model is an implicit assumption that we can slowly or steadily perhaps better said, improve margins over time, because there is a lot of efficiency work going on within the cost of goods sold, within the DME, particularly the non working part of the DME, we've got a lot of focus on the agency roster and how we spend the money we spend before we even gets to see the consumer. And obviously, we've done the network organization, which was about making us better able to support the growth aspirations, but it is also more efficient organization. And so all those things will go into the mix. And it would be remiss of me to not include the impact of RGM. Because to the extent that we can leverage RGM, that also helps on a gross margin, and ultimately operating income margins. So we will be pulling all those levers as we go through 2021. But again, it won't be a fully normal year in every region. And so you will see some of these strange effects. Operator: Your next question comes from the line of Carlos Laboy with HSBC. CarlosLaboy: Yes. Good morning, everyone. Could you give us a sense of where you are seeing some notable progress this past year on digital transformation perhaps tied into this inflation end margin question, right, by commenting on how digital tools are perhaps helping you mitigate or stay ahead of inflationary pressure in some markets that might be getting ahead of the curve here. JamesQuincey: I mean, the digital transformation is much above and beyond coping with inflation, although, of course, some of the tools will help us manage if there's an inflationary spike. Clearly, you can look at the digital transformation in terms of our engagement with consumers. And there are some, good examples of progress, China, which is started the year very strongly not just compared to 2020 but compared to 2019. It's been a much bigger shift into digital engagement with consumers or even in Japan with our own Coke On apps that we use to connect people to the vending machines and the cashless options and a large uptick in monthly active consumers. So there is a great deal of progress being made in terms of how we engage through digital media, how we engage directly with consumers in a digital relationship that's helping there, the system I used, I talked about the example of buying materials with digital platforms. But clearly there's a huge piece of what needs to happen, which is the backbone of both the company and the bottlers and the interoperability of all the data, where we're making excellent progress. And ultimately all those insights and all those efficiencies help us manage the inflationary pressures out there whether we use the insights to engage more consumers or use the insight to drive the RGM thinking, an implementation or to identify efficiencies, I mean, in a way digital is becoming just the way business is done. And it's just like saying, I turn up and have to manage the business and use all these tools to do all the things I got to do. JohnMurphy: Maybe I just add one comment there, James. If you think about the emerging stronger program that we've outlined over the last six to nine months, it would not have been possible to do three years ago, and the degree to which we have been able to operate in a fast and efficient manner across the globe to deliver this program is all due to the fact that we have essentially become digitized in how we work and how we operate, just to support what James about your last comment there. Operator: Your next question comes from a line of Steve Powers with Deutsche Bank. StevePowers: Thank you. Maybe pivoting back to the top line. So March volumes back to even with 2019 is just very key and promising milestone. And we've seen sequential progress over the last few quarters. But I guess I'm curious whether that trend back to 2019 levels have been relatively smooth on a global basis, or there's been more volatility underneath the service than we may appreciate looking at the headline numbers. So maybe if you could just frame for us how performance versus 2019 has trend over the past few months. And if you expect those trends to, and how you expect those trends to evolve over the course of the year in terms of whether it would be relatively smooth and even or lumpy with case counter vaccinations, and like I guess, ultimately, do you expect to be back to growth versus '19 when the dust settled on April? Or is that is that too ambitious? JamesQuincey: So the progress when you stand back and look at the numbers in aggregate, clearly, April was the deepest hole that we fell into in 2020. And then as we adapted the business, and really drove what we were doing, then, we sequentially got better. So kind of we fell into the hole, I think it was like minus 25 or something in April last year, and then it was negative teens, and then negative single digits, slowly improving through the rest of 2020 and then coming into 2021. Obviously, we then cycling the bad year, but if we compared to 2019, it got better as we went from January in February, which was still below the '19 levels. And obviously March was above, I mean, April has started well. It's obviously they are going to be the weirdest month because recycling something very low. I think most importantly, I would refer you back to the comment I made the second thing I said relative in the first answer, which is just because March has gone back to the level and just because April has started well, one week, there's no guarantee that that is then some kind of trend that is in the bank. The principal uncertainty remains the risk of additional lockdowns. Much as 2020's numbers were heavily impacted by the degree of lockdown that will remain true this year. So whilst we've got back above the line of flotation in March, there's no guarantee there won't be some extra degree of lockdowns in May or September or December that then, puts pressure back on the business. So, I don't think I know I keep hitting this point, we had a superstar to the year, and the momentum is building. But this very unusual factor of the pandemic and the lockdowns continues to be an uncertainty factor that one can't draw a straight line through the historic data. Now, once you get under the surface of the overall global numbers, which kind of look like the kind of the tick mark if you like going down and then kind of steadily improving. Clearly, you get much more variability at a country level. Again, heavily influenced by the degree of lockdown. So in a sense, April last year was the worst because you had the most number of countries, most, the highest degree of synchronization of lockdowns globally and I think this idea of saying the recovery will be asynchronous, is we already see that in the first half, you've got countries where the vaccine levels are going up. And the reopening is occurring, US, UK, China for examples. And yet you've got countries going in exactly the opposite direction with cases shooting up, and more levels of lockdown. And that's what we're trying to highlight with this asynchronous. It may be that as a total company, it all looks smoothed out somewhat. But this asynchronous feature will be very important in 2021. Operator: Your next question comes from the line of Bonnie Herzog with Goldman Sachs. BonnieHerzog: All right, thank you, and good morning, everyone. I was just hoping to switch gears a little bit and maybe hear a little bit more color behind your decision to IPO Africa. I know you guys have explored a sale in the past. But why do you think, this is the right decision for that business? And then how do you expect this will impact the performance of the business going forward maybe potential benefits you might see? Thanks. JamesQuincey: Sure, thanks Bonnie. It means certainly, it's always been our intention to reduce our ownership in CCBA in line with our strategy, as John puts it, to become the world's smallest coke bottler. And so we were always contemplating how we would re-franchise CCBA. I mean, the CCBA, Coca-Cola Beverages Africa is a strong, well structured, capable bottler, and we have always considered as one of the options whether to have it be a free standing entity in Africa. And we have reached in inclusion that if one thinks about the future potential of the African market and the African continent, and how much long growth there is there. I mean, it is the youngest billion people are in Africa, we think it would -- we've ultimately contemplated it would be right for the development of the business in Africa to have an African headquartered African bottler that is operating on the continent. And so the read through is we believe in the future of Africa, as a continent as an economy, we think we've got a great, capable bottler that can help lead our ability to grow there. And then an IPO will allow us to set that up to be a source of growth for many years to come. Operator: Your next question comes from the line of Andrea Teixeira with J.P. Morgan. AndreaTeixeira: Thank you, operator and good morning. And so can you quantify how much the impact of the winter storms had in your volumes in Q1? And as a follow up on your comments before, can you please give us an idea how you're trending in Q2, the same way you did, it helped us in the first quarter. And just because just a quick one on US tax dispute. What is your base case in terms of the timing for the appeal at this point, and your impact on the cash flow? JohnMurphy: Yes. I'll take it. Maybe start with the tax question. Andrea thank you for the questions. But let's start with the tax question. In terms of to say on timing, it's -- we do not have a picture at the moment. We are dependent on the outcome of another case. Before any further developments take place with our own case. And we have no visibility into that outcome. So we'll keep you apprised as we know more. On the storms in the US, not a material impact to our business. And with regard to volumes in Q2, we're still early in the quarter and not lot to, we, not a lot to say at the moment. I think the key highlights really as we look at the downhill is the fact that March was significantly improved in a number of markets where mobility is improving and will continue I think to see a close relationship between mobility and our performance. Operator: Your next question comes from line of Kaumil Gajrawala from Credit Suisse. KaumilGajrawala: Hi. Good morning, everybody. And fantastic pronunciation, operator. I don't get that frequently. Thank you. If I may ask James and John about competition and maybe particularly in the United States, looks like Pepsi is getting some momentum. We obviously just heard from them on Friday. Here, it seems, of course, that pricing remains rational. But perhaps from competitiveness, x-pricing, maybe that's increasing. So if you could just talk about what you're seeing there would be useful. Thanks. JamesQuincey: Well, certainly that we're always happy to see other companies invest into the beverage industry, because that tends to create more consumer engagement. And obviously, we pay attention to what they're doing, because hopefully we can learn from them. There are a lot of very capable competitors out there. So we like to learn from them. But in the end, we focus on what we can do. And in the US in particular, channel mix aside, we gain share, we gain share going forward in beverages in the US business. And we feel confident that as the channel trends and the reopening bring back the away from home businesses, which of course they started to do in March, then we will be able to capitalize on those trends, as well. And as it relates to promotional activity, I mean, ultimately, we are seeing a kind of rational pricing and promotional environment in the US. And we'll certainly be looking to build on that with our RGM capabilities and with the bottling system to really drive and leverage the investments we're collectively making as a system in the marketing and the execution to drive the business forward. Operator: Your next question comes from the line of Rob Ottenstein with Evercore ISI. RobOttenstein: Great, thank you very much. Couple of questions on Topo Chico, looks like a very strong start in the US with about a 3% market share. But you started even earlier, I think in October in Mexico and Brazil, and now rolling out in Europe. Can you talk to us a little bit about how you feel about the execution of the bottling network with an adult beverage? Any signs of trends in terms of repeat and some of the earlier markets and any general learning that you've gotten so far, as you evaluate what could be a new growth engine for the company? Thank you. JamesQuincey: Thanks Robert. So in the markets where it's been in longer say, Latin America, and Europe, about 40 markets between them. A couple of things we're seeing, obviously, the degree of resonances is depending on the degree of category development that might already exist or not exist in some of those markets. And so we've seen different levels of engagement depending on whether the categories there or not. Secondly, I mean, we're clearly in the mode of learning how to compete in this category, both from a branding point of view and from an execution point of view. But we're definitely starting to see improving trends and good repeats in the context of the different markets where it's been launched, whether that be Latin America, or in Europe, we're still building out distribution in Mexico, for example. But we've done a good start in Europe a little easier, as I said, because the categories a bit more developed in the West versus the East. And so our focus is maximizing the amount of learning that we're doing and as it relates to the US, whilst our overall share is three and I would double underline that, Topo Chico, as a brand is well known in the US, and therefore, driving or creating trial on a well known brand with an innovation is actually relatively straightforward. The key is to repeat. And we have not yet got to the point of having good repeat data in the US having opened big caveat umbrella, I would comment that, Topo Chico Hard Seltzer might have 3% overall in the US, but actually in Texas, where we've kind of concentrated some of the launch. It's almost hit a 20 share in the first two weeks of launch. So we are encouraged by the early results, but it's all going to come down to repeat and nothing's worth anything without repeat. Operator: Your next question comes from the line of Kevin Grundy with Jefferies. KevinGrundy: Great. Thanks. Good morning, everyone. And congratulations on a nice progress this quarter. James, I wanted to come back to your Asia Pacific business, specifically China, obviously a really strong result this comes on the heels of PepsiCo strong results in China as well. China, obviously earlier to the pandemic than other countries, and then you're seeing nice strong consumer demand here. So a few questions, please. One, can you talk about what you're seeing by channels, both at-home and away from home, maybe comment briefly on the trends in April relative to the strong results in the first quarter? And then lastly, just how the strong demand in China may be informing your view with respect to recovery in other markets? Thank you. JamesQuincey: Sure. Yes, clearly good results in China. We're definitely I mean, obviously, we're laughing, and we're beginning to laugh to the kind of the worst part of 2020. But ahead of 2019, we've lengthened to the reopening and the reenergizing of China with the consumer marketing with a big push into digital engagement with the consumer with a big push into e-commerce. And we are benefiting from that. It is worth noting that in terms of the channels, almost what we see, and this is true, when you look at not just China, but if you start looking at Australia or even the US you see kind of phases or waves of the reopening. And so as the reopening occurs actually get a lot of people going out to restaurants and the kind of the full service eating away. And that goes up, bearing in mind that the universe of mom and pop stores and the universe of small restaurants has shrunk people that the number of people running those sorts of businesses has shrunk. And I think we're gonna see that all across the world. So there is a consolidation factors. And as the reopening occurs, you see a lot of going out in the evenings. So all the channels related to that come back first. The second kind of wave of improvements in channels is loosely in the bucket of office and commuting. Because as reopening happens, people go out, yet the offices aren't back at 100% capacity. So you've not got that ecosystem of commuting and lunchtime in the big city centers at full. And that's the kind of the second business coming back in China. And actually, you don't see that back yet in the US in March, you see the restaurants kind of bouncing back. But you don't see the kind of the ecosystem of commuting and offices having bounced back anywhere near the same degree. And then there's a third phase, which hasn't really happened yet. Which is kind of the large gatherings kind of phase of channels, whether that be cinemas, concerts, sporting events, et cetera, et cetera? And that's only very partial coming back. So I think, think of this kind of a set of waves of reopening as the economy normalizes. And we thought about that. And we're kind of investing both in the consumer and the bottlers are doing a great job of investing for the customers and retailers. And we're seeing a very nice result. Operator: Your next question comes from the line of Sean King with UBS. SeanKing: Hey, thanks. This happens to a number of regions, but the APAC concentrate sales came in 11 points ahead of the unit case volume. But what drove that gap besides I guess the calendar shifts? And should we expect like a reversal in this dynamic or is it something that is sort of is going to continue as we see markets reopen? JamesQuincey: So for APAC, just specifically on your question, yes. APAC has run ahead, mainly due to the extra days in the quarter. And we also had a timing impact with regard to Chinese New Year in China, obviously. And so but for the quarter overall you saw gallons running ahead, mainly due to the extra days in the quarter. Operator: Your next question comes from the line of Laurent Grandet with Guggenheim. LaurentGrandet: Yes, very nice pronunciation as well. So good morning, everyone. Yes, so I'd like to focus on emerging markets. So you said in your prepared remark that the volume case is correlated to the consumer mobility driven by vaccination rates. So, as I call into the video show, I mean, vaccination rates should be about 70% by the end of the year in developed market, but sadly, just about 20% in emerging markets. So should we consider then that emerging markets would be slower to recover? And really, probably, if you can provide some significant thought there, and maybe some granularity between that between regions? Thank you. JamesQuincey: Sure. So, I think, as you say, clearly, the vaccination rates in the developed markets are going to be ahead of the developing markets for the duration of this year. The critical factor to add to that is the market response to the level of cases or the low vaccination rates in the developing markets, because the thing that impacts our business most directly is the degree of lockdown. And so it's the response to the level of cases of the COVID and the resulting lockdowns, rather than necessarily directly the level of vaccination, because there are countries where the level of vaccination is low, because they had a strong lockdown, and then kind of lock the country up, say, Australia, whatever, then they've started to reopen. So the key factor to look for is the degree of lockdown and think through for that market, what's likely to happen, connected, of course, to the level of vaccinations, but also to the level of cases and what the policy response in the country is likely to be. And there'll be countries where I think, frankly, and unfortunately, they don't have the wherewithal and the fiscal capacity to implement large lockdowns, even if they not got all the vaccines that they want. And the markets remain open. And of course, we will look for ways to adapt the business to support the people, support the retailers and continue to engage with consumers as that goes on. Operator: Your next question comes from the line of Bill Chappell with Truist Securities. BillChappell: Thanks, good morning. Hey, just want to follow up. And this is fairly near term and acute to the US, but I'm just trying to understand kind of the commentary of how you're looking at the business in that. I mean, it seems that the US will be different in kind of the reopening of everywhere else. So high majority of the population will be inoculated in the next 30 days, just as schools are getting out just as the weather's getting good. You have kind of sporting events talking about full capacity in June. I mean, are you -- is that a scenario you're prepared for and the bottling network is prepared for if the business, the on-premise business just explodes? And or do you really think that this is just going to be kind of go from phase two to phase three in May in phase four in June and slowly going to open up over the summer? JamesQuincey: What I think the phases are going to exist, Bill, there are just going to happen very quickly in the US. So if I look at what's already happening I put eating and drinking in the evening in kind of phase one. I mean, those that bit of the away from home was trending negative, in volume strongly negative in volume in January and February. And as the reopening happened, it jumps up in March. And as you say, as school, as education and at work opens, both of which are still running negative in March, I think they're going to jump up again. So what I think we're going to see, as the US completes its kind of rapid vaccination is a quick succession of the phases rather than a drawn out set of the phases. Other parts of the world where the vaccination programs are slower, then I think you'll see a more gradual phasing of what happens. Operator: Ladies and gentlemen, this concludes our question-and-answer session. I would now like to turn the call back over to James Quincey for any closing remarks. James Quincey: Okay, so thanks very much, everyone. It's certainly been great talking to you all. We had an excellent first quarter very encouraging. Still many of the parts of the world yet to emerge from the pandemic. But as we navigate this kind of dynamic environment, we will continue to evolve and do better. And we are well positioned to the recovery as it plays out both as an organization and as a system. And as always, we thank you for your interest, your investment in our company, and for joining us today. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Coca-Cola Rises 3% on Strong Q4 Earnings, Pricing Strategy Boosts Demand
Coca-Cola (NYSE:KO) delivered better-than-expected fourth-quarter earnings, as strategic pricing and product innovation helped drive an unexpected rise in global volumes. The results lifted the soda giant’s stock more than 3% intra-day today.
The company’s focus on higher-priced beverages and packaging adjustments—such as slimmer 12-ounce cans—has helped maintain demand, particularly in the U.S., where budget-conscious consumers have been more selective with their spending. This strategy supported growth in premium offerings like sparkling flavors, juices, plant-based drinks, and value-added dairy.
North America unit case volume increased by 1%, with regional revenue surging 16%. However, this strength was partially offset by flat volumes in Europe, the Middle East, and Africa, where supply chain disruptions—particularly in the Middle East—posed challenges.
Globally, unit case volume expanded by 2%, defying expectations of a slight decline. Notably, China, which has struggled with sluggish post-pandemic consumer demand in recent quarters, contributed to the volume growth.
Financially, Coca-Cola posted comparable earnings per share of $0.55, marking a 12% increase from the prior year and beating analyst estimates of $0.52. Revenue climbed 6% year-over-year to $11.50 billion, also surpassing expectations.
Looking ahead, Coca-Cola projects organic revenue growth of 5% to 6% for fiscal 2025, slightly below the 7.09% analysts had anticipated. Comparable EPS is expected to grow 2% to 3%, reaching a range of $2.94 to $2.97, aligning closely with Wall Street estimates of $2.95.
Coca-Cola Upgraded to Buy as Growth Potential Aligns with Attractive Valuation
TD Cowen analysts upgraded Coca-Cola (NYSE:KO) to Buy from Hold, maintaining a price target of $75 on the stock. The upgrade reflects confidence in Coca-Cola’s ability to sustain strong performance across multiple markets and capitalize on long-term growth opportunities, particularly in international markets.
The analysts raised the fiscal 2025 organic sales growth estimate to 6%, at the high end of Coca-Cola’s long-term growth projections. This optimism is based on the company’s exceptional execution in key regions, even amidst temporary challenges. The recent pullback in Coca-Cola’s stock, driven by concerns over a temporary slowdown in third-quarter volumes and uncertainties around new U.S. trade policies and foreign exchange impacts, is seen as an overreaction.
According to the analysts, Coca-Cola remains well-positioned to benefit from increasing per capita beverage consumption globally, offering significant growth potential in emerging markets.
Coca-Cola (NYSE:KO) Surpasses Earnings and Revenue Estimates
- Coca-Cola reported an EPS of $0.77, beating the estimated $0.746 and marking a 5% increase year-on-year.
- The company's revenue for the quarter was $11.95 billion, surpassing the estimated $11.61 billion.
- Adjusted operating margin improved to 30.7%, despite challenges from currency headwinds and a decline in unit case volume.
Coca-Cola (NYSE:KO) is a leading player in the global beverage industry, known for its iconic soft drinks. The company operates in the Zacks Beverages - Soft Drinks industry and competes with other major brands like PepsiCo. Coca-Cola's financial performance is closely watched by investors, given its significant market presence and brand recognition.
On October 23, 2024, Coca-Cola reported earnings per share (EPS) of $0.77, surpassing the estimated $0.746. This marks a 5% increase from the $0.74 EPS reported in the same quarter last year. The earnings surprise for this quarter is 4.05%, as highlighted by Zacks. In the previous quarter, Coca-Cola also exceeded expectations with an EPS of $0.84, resulting in a 5% surprise.
Coca-Cola's revenue for the quarter ending September 2024 was approximately $11.95 billion, exceeding the estimated $11.61 billion. However, this represents a 1% year-on-year sales decline. The revenue performance was characterized by a 10% growth in price/mix, although there was a 2% decline in concentrate sales due to shipment timing. Despite this, Coca-Cola has consistently surpassed consensus revenue estimates over the past four quarters.
The company's adjusted operating margin improved to 30.7% from 29.7% the previous year, despite a $919 million charge related to the remeasurement of contingent consideration liability from the 2020 acquisition of Fairlife and currency headwinds. Coca-Cola's strategic pricing adjustments helped offset a decline in unit case volume, which saw a 1% decrease. Growth in markets like Brazil, the Philippines, and Japan was offset by declines in China, Mexico, and Turkey.
Coca-Cola's stock experienced a downturn despite surpassing profit expectations, largely due to a significant price increase that counterbalanced the unexpected decline in unit case volume. The company's financial metrics, such as a price-to-earnings (P/E) ratio of 27.39 and a debt-to-equity ratio of 1.69, provide insight into its market valuation and leverage level. Looking ahead, Coca-Cola anticipates a 10% organic revenue growth in the fourth quarter.
Jefferies Maintains "Hold" Rating on Coca-Cola (NYSE:KO) with Increased Price Target
- Jefferies has raised its price target for Coca-Cola from $65 to $73, maintaining a "Hold" rating.
- Coca-Cola reached a 52-week high, indicating strong market performance and potential for future growth.
- The company's market capitalization stands at $310.53 billion, reflecting its significant presence in the beverage industry.
On August 29, 2024, Jefferies, a well-known financial services company, decided to keep its "Hold" rating on Coca-Cola (NYSE:KO) but increased its price target from $65 to $73. This decision was based on their continuous evaluation of Coca-Cola's standing in the market and its potential for future growth. At the time of this announcement, Coca-Cola's stock was trading at $72.05, as reported by TheFly. This adjustment by Jefferies indicates a positive outlook on Coca-Cola's performance and its ability to maintain a strong market position.
Coca-Cola, a global leader in the beverage industry, competes with other major companies to dominate the market. Its ability to reach a 52-week high, as highlighted by Zacks Investment Research, has sparked a conversation among investors and analysts. This milestone is significant because it reflects the company's current strength in the market and its potential for future growth. The stock's peak at $72.215, surpassing the previous year's low of $51.55, showcases Coca-Cola's recovery and growth amidst market fluctuations.
The trading session that saw Coca-Cola's stock reach its 52-week high was marked by a trading volume of approximately 14.79 million shares. This level of activity indicates a strong interest in Coca-Cola's stock, further supported by its market capitalization of $310.53 billion. Such financial metrics are crucial for investors to understand the scale of Coca-Cola's operations and its significance in the market.
Jefferies' decision to raise the price target for Coca-Cola to $73 reflects an optimistic view of the company's future prospects. This is supported by Coca-Cola's recent performance, reaching a 52-week high and demonstrating a solid market position. The increase in the price target suggests that Jefferies believes Coca-Cola has the potential to grow further and strengthen its market presence.
Overall, the adjustment in Coca-Cola's price target by Jefferies, coupled with the company reaching a 52-week high, paints a positive picture of Coca-Cola's market position and future prospects. Investors and analysts will likely continue to monitor Coca-Cola's performance closely, considering these developments as indicators of the company's potential for sustained growth and profitability.
Coca-Cola Beats Q2 Earnings and Revenue Estimates, Raises Full-Year Outlook
Coca-Cola (NYSE:KO) shares rose more than 1% in pre-market today after the company reported its second-quarter 2024 earnings, surpassing analyst expectations with an adjusted EPS of $0.84, which was higher than the Street estimate of $0.80. The company also beat revenue forecasts, posting $12.4 billion compared to the anticipated $11.77 billion.
Net revenues for the beverage giant increased by 3%, while organic revenues jumped 15%, driven by a 9% rise in price/mix and a 6% increase in concentrate sales.
Operating income grew by 10%, and the operating margin improved to 21.3% from 20.1% in the previous year. The comparable operating margin (adjusted) also increased to 32.8%, up from 31.6% last year. Despite these gains, reported EPS fell by 5% to $0.56, although the comparable EPS (adjusted) rose by 7%.
James Quincey, Chairman and CEO of Coca-Cola, expressed satisfaction with the results and confidence in meeting the raised 2024 guidance and long-term goals.
For the full year 2024, Coca-Cola updated its outlook, now expecting an organic revenue growth of 9% to 10%. The company anticipates a 5% to 6% currency headwind on comparable net revenues and an 8% to 9% currency headwind on comparable EPS growth.
Despite these challenges, Coca-Cola remains optimistic about achieving a comparable currency-neutral EPS growth of 13% to 15% and a comparable EPS growth of 5% to 6%, compared to $2.69 in 2023.
Coca-Cola Announces Leadership Changes and Financial Health
The Coca-Cola Company's Leadership and Operational Excellence
The Coca-Cola Company (KO:NYSE) has recently announced a series of significant corporate changes and financial updates that reflect its ongoing commitment to leadership and operational excellence. Among these changes, Brenda Hofmann's election as the new Senior Vice President and Chief of Internal Audit marks a significant transition in the company's audit department. Hofmann, with her extensive experience within Coca-Cola since 1994, is set to bring a wealth of knowledge in finance, procurement, and general management to her new role. This leadership change comes as Barry Ballow retires after a commendable 34-year career, highlighting Coca-Cola's dedication to maintaining a strong and experienced leadership team.
In addition to Hofmann's appointment, Coca-Cola has made strategic moves in its supply chain and information security departments. Leonardo Zei's new role as Vice President and Head of Strategic Ingredient Supply is crucial for the company's supply chain sourcing activities, especially for flavor and non-agricultural ingredients. This position is vital for Coca-Cola's global operations, ensuring the company continues to meet its high standards for product quality and sustainability. Similarly, Derek Benz's election as Senior Vice President while continuing as Chief Information Security Officer underscores the importance of cybersecurity in today's digital age. Benz's nearly three decades of experience in the cybersecurity industry are invaluable to protecting the company's information assets.
Ellie May's appointment as Chief Accounting Officer, in addition to her role as Senior Vice President and Controller, further strengthens Coca-Cola's financial leadership. May's extensive background as an audit partner at Ernst & Young LLP for over 20 years equips her with the expertise necessary to oversee Coca-Cola's accounting practices and financial integrity. These leadership changes are complemented by Coca-Cola's declaration of a regular quarterly dividend of 48.5 cents per common share, demonstrating the company's financial health and commitment to returning value to shareholders.
The backdrop of these corporate and financial updates is Coca-Cola's solid performance in the stock market. The company's stock price recently reached $62.17, reflecting a modest increase and showcasing the market's positive reception to Coca-Cola's strategic decisions and leadership appointments. With a market capitalization of about $268.03 billion and a trading volume of 10.97 million shares, Coca-Cola continues to be a dominant player in the global beverage industry. This financial stability and market confidence are crucial as Coca-Cola navigates the complexities of the global market, aiming to refresh the world and make a difference through its sustainable practices and community contributions.
Coca-Cola Reports Better Than Expected Q1 Results
The Coca-Cola Company (NYSE:KO) kicked off 2024 on a strong note, outperforming market expectations for the first quarter. The company recorded adjusted earnings per share of $0.72, above the consensus forecast of $0.70. Its revenue for the quarter also topped expectations at $11.3 billion, compared to the predicted $11.02 billion.
The beverage giant achieved a 3% year-over-year increase in net revenues, while its organic revenues rose by 11%. This growth was largely driven by a 13% increase in price/mix, although it was offset somewhat by a 2% drop in concentrate sales. Global unit case volume also saw a slight increase of 1%. However, Coca-Cola’s operating income declined by 36%, impacted by charges related to its fairlife and BODYARMOR trademarks and adverse currency effects.
For the full year of 2024, Coca-Cola revised its guidance, now anticipating an 8% to 9% increase in organic revenue. The company expects a 4% to 5% impact from currency fluctuations on net revenues and a 7% to 8% impact on comparable EPS growth. Despite these headwinds, Coca-Cola is projecting an 11% to 13% rise in comparable currency neutral EPS and forecasts a 4% to 5% increase in comparable EPS from the $2.69 reported in 2023.
