Coca-Cola (KO) likely had another strong quarter, despite market uncertainty

The Coca-Cola Company (NYSE: KO) delivered a strong performance in the first half of the fiscal year, aided by measures initiated under its all-weather strategy. Buoyed by the positive momentum amid healthy global demand, the soft drink titan recently raised its full-year forecasts for organic sales and comparable earnings. The company is expected to post higher sales and profit when it reports third-quarter results next week.

Stock Peaks

After making steady gains since early this year and hitting an all-time high a month ago, the beverage giant’s stock traded flat in recent weeks. KO has grown more than 30% in the past twelve months, and the management’s upbeat guidance might continue driving investor confidence. It is worth noting that Coca-Cola has constantly dominated the non-alcoholic beverage market, while its arch-rival PepsiCo often struggled to stay resilient to challenges.

Coca-Cola’s third-quarter report is slated for release on Wednesday, October 23, at 6:55 am ET. It is estimated that adjusted profit increased to $0.74 per share in Q3 from $0.67 per share in the year-ago quarter. The consensus revenue estimate is $11.6 billion, representing a 1.4% year-over-year increase. For the past seven years, the company’s quarterly earnings have consistently beaten or matched estimates, and the trend continued in the second quarter.

Stable Demand

While there is a pullback in spending among certain consumer segments globally — reflecting economic slowdown and geopolitical issues — demand for Coca-Cola’s premium products and value-added dairy beverages remains strong. To some extent, that is due to unabated spending by high-income customers, supported by the company’s extensive global presence and diversified portfolio. This year, its aggressive pricing strategy – with hikes of up to 13% across the portfolio — helped maintain healthy profits despite volumes coming under pressure at times, especially in North America.

From Coca-Cola’s Q2 2024 earnings call:

“Overall, our industry remains attractive and is expanding. We believe we’re well-positioned to capture the vast opportunities available to us. Across the world, we’ll continue to navigate many varying market dynamics locally to deliver our global objectives. In Asia Pacific, we had strong performance across most of our footprint. In ASEAN and South Pacific, the re-franchising of the Philippines is off to a good start. In the Philippines, we grew volume by double digits and drove strong value share gains by increasing focus on affordable packages, including accessible price points and refillable offerings.”

In Q2, adjusted earnings rose 7% year-over-year to $0.84 per share. On a reported basis, net profit declined 5% year-over-year to $2.4 billion or $0.56 per share in the June quarter. At $12.4 billion, second-quarter revenue was up 3% year-over-year and above estimates. Sales increased in the Americans and the EMEA region, which was partially offset by contraction in the other segments.

Guidance

According to its revised outlook, the company expects full-year organic revenue to grow 9-10%, up from the previous range of 8-9%. It has raised the comparable EPS growth forecast to 5-6% from the prior outlook of 4-5% growth. Comparable currency-neutral EPS is expected to grow 13-15% in FY24.

Shares of Coca-Cola hovered slightly above the $70 mark on Friday afternoon, after trading mostly sideways during the week. It is up 19% since the beginning of 2024.