Categories AlphaGraphs, Analysis, Earnings, Retail

Earnings preview: Will new biz model help Coca-Cola beat currency woes in Q2?

The overall performance of Coca-Cola (NYSE: KO) has been negatively impacted by macroeconomic headwinds for some time, including unfavorable foreign exchange rates. The beverage giant is likely to offer a mixed bag when it publishes second-quarter results on Tuesday before the opening bell.

Coca-Cola’s overreliance on the international market for revenue generation, compared to PepsiCo, makes it vulnerable to fluctuations in the global economy, which is currently witnessing signs of a slowdown.

Coca-Cola (KO) reports better-than-expected Q1 earnings

The lackluster outlook issued by the management recently, predicting flat earnings for the current fiscal year, shows the softness in foreign markets like Europe and China and currency-related headwinds will persist in the coming months.

New Biz Model

Thus, the market is closely watching the company’s shift from traditional carbonated drinks to new areas through strategic deals such as the recent acquisition of European coffee giant Costa. With more such deals in the pipeline, the diversification efforts have already started yielding results.

Related: Coca-Cola Q1 2019 Earnings Conference Call Transcript

The change in the business model is very important for the company considering the weakening sales of soda-based drinks as customers continue to switch to healthier alternatives. Other experiments, such as the launch of sugar-free and specially-flavored versions of Coke, have been well-received by customers, with sales growing in double digits.

Estimate

The consensus estimate for the company’s second-quarter earnings is $0.62 per share, a tad higher than $0.61 per share reported in the comparable period of last year. The outlook for revenue is quite upbeat, with analysts predicting a 10% year-over-year increase to $9.79 billion.

Past Performance

In the first quarter, adjusted earnings moved up 2% annually to 48 cents per share, surpassing Wall Street’s forecast. The bottom-line benefitted from a 5% increase in revenues to $8 billion. While being cautious in its outlook, the management said second-quarter results will be negatively impacted by costs related to acquisitions and divestitures. The estimated impact of negative currency movements on revenues is 4-5%.

Also see: Pepsico Q1 2019 Earnings Conference Call Transcript

Earlier this month, rival beverage maker PepsiCo (PEP) reported a 2% increase in revenues to $16.4 billion for its most recent quarter. Meanwhile, adjusted earnings dropped to $1.54 per share due to lower margins.

Coca-Cola’s stock surged to a record high at the beginning of the month, after gaining about 16% in the preceding three months. Since last year, it moved up 15% but continues to lag behind the S&P 500 index.

Follow our Google News edition to get the latest stock market, earnings and financial news at your fingertips

Most Popular

Intensity Therapeutics is establishing a new field of localized cancer reduction: CEO

Intensity Therapeutics, Inc. (NASDAQ: INTS) is a clinical biotechnology company engaged in the discovery development, and commercialization of first-in-class cancer drugs that attenuate tumors with minimal side effects while training

INTU Earnings: Intuit Q1 2025 adj. profit rises on higher revenues

Financial technology company Intuit Inc. (NASDAQ: INTU) Thursday announced results for the first quarter of 2025, reporting a modest increase in adjusted earnings. The Mountain View-headquartered company’s first-quarter revenue came

Riding the AI wave, Nvidia looks set to stay on the high-growth path

After delivering strong results for the third quarter, Nvidia Corporation (NASDAQ: NVDA) this week said the launch of its new-generation Blackwell chip is on track. The company is thriving on

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top