Coca-Cola Q3 earnings preview: A look at the tailwinds and challenges

The Coca-Cola Company (NYSE: KO) has constantly innovated its product portfolio and is currently focused on non-carbonated beverages. As part of the shift in the business model, in response to customers’ changing tastes, the company has added several new products, with the latest being its first energy drink.

The soft drink giant will be publishing its third-quarter results Friday at 6:55 am ET. Analysts’ consensus earnings estimate of $0.56 per share represents a 2% decline from last year. Revenues are seen growing by 15% to $9.47 billion. The bottom-line either matched or surpassed the estimates in all of the previous four quarters, driving the stock up on each occasion.

Related: Coca-Cola Q2 2019 Earnings Conference Call Transcript

The Atlanta, Georgia-based beverage maker is poised to benefit from the market’s favorable response to the new product line, as it aims to transform into a total beverage company. The strategy of exploring new growth avenues while reinvigorating the legacy brands has worked well for the company. The no-sugar and flavored variants have revived Coke’s sales momentum in recent months, which will reflect in the upcoming results. Also, Coca-Cola Energy hit new markets during the quarter.

Exchange Rate Woes

It is expected that the cost pressures, mainly from investments in growth initiatives, will ease to some extent helped by the ongoing efforts to streamline operations and optimize the supply chain. These benefits might be partially offset by unfavorable currency exchange rates – the main reason behind the company’s cautious earnings guidance. For the management, Americans’ growing distaste for soda-based drinks and stiff competition will remain a cause for worry going forward.

Q2 Outcome

After reporting better-than-expected results for the second quarter, the company revised up its full-year outlook for organic sales growth. June-quarter sales grew 6% annually to $10 billion, lifting adjusted earnings to $0.63 per share, which represents a 4% increase from last year.

PepsiCo Profit Dips

Earlier this month, rival beverage firm PepsiCo (PEP) reported a decline in third-quarter earnings, despite a 4% increase in revenues to about $17 billion as all the business segments registered growth. The results also exceeded the forecast.

Also see: Monster Beverage could get hurt by Coca-Cola’s energy drink

Coca-Cola shares climbed to an all-time high last month, maintaining the positive momentum seen since the beginning of the year. The stock gained 19% in the past five years and 15% since last year, outperforming the industry and the S&P 500 index.

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