It’s been a fairly subpar earnings season for most of the big names on the S&P 500 over the past month or so. With much of the major reporting all behind us, there are still some big names to come, and this week, we turn to Coca-Cola, which is due to report earnings on Tuesday, 14th of February.
The major soft drink company based in Atlanta, whose brands include Dasani, Fanta, and its namesake drink, has been increasing product prices to combat inflation, but as a result, customers have been trading down to smaller package sizes or rivals that sell cheaper knockoffs.
Are Coca-Cola shares a buy, and will the company manage to beat expectations on its latest earnings? We’ll take a look and see what’s in store for Q4, full-year earnings, and the year to come.
PepsiCo’s Latest Earnings Beat Expectations
For Coca-Cola’s main rival PepsiCo, revenue and profits for the quarter announced last week were above Wall Street estimates, thanks in large part to the company charging higher prices for its food and beverage products.
Although PepsiCo and Coca-Cola make similar soft drinks and are direct competitors in most areas, they are slightly different in the way they conduct business. PepsiCo also markets a wide variety of convenience style and packaged foods which are generally at an attractive price point during difficult economic conditions, so this will have impacted earnings for the upside.
Organic volume fell 2%, but to combat rising freight and material expenses as well as the negative effects of a stronger dollar on overseas sales, average product prices increased by 16%.
The company anticipates 6% organic sales growth and an 8% increase in core constant currency EPS in 2023. While also intending to buy back over $1.0 billion in shares. In addition, PepsiCo announced its 51st consecutive annual increase to its dividend, a 10% bump, effective with its June 2023 payment.
Looking Back at Coca-Cola Q3
Even though there had been substantial effects brought on by the pace of inflation as well as the strength of the United States dollar, Coca-Cola’s Q3 was a positive one.
Profits per share of $0.69 surpassed Wall Street expectations of $0.64. Additionally, revenue came in slightly higher than anticipated at $11.05 billion, compared to the $10.52 billion previously reported.
At the time, the company raised its outlook for adjusted EPS and organic revenue growth. While cautioning against the effects of rising prices and volatility for 2023.
They said they expected adjusted earnings per share growth of 6% to 7% in 2022, up from 5% to 6% previously. While organic sales growth was forecast to jump from 12% to 13% to 14% to 15%.
According to Financial Researcher Zacks, quarterly profits for Coca-Cola are expected to be $0.45 per share, around the same as in Q4 2021. It’s anticipated that quarterly sales of $10.01 billion will be posted, which is an increase of 6% over the prior-year period.
This would bring Coca-profits Cola’s for Fiscal 2022 to $2.48 per share, an increase of 7% from where they were before. Sales are projected to increase by 11% in the fiscal year 2022, reaching $42.86 billion from $38.66 billion in the 2021 fiscal year.
Can the Company Successfully Continue to Weather the Economic Storm?
Q3 results and Q4 earnings show the resiliency of packaged food manufacturers, particularly in the United States, as consumers prioritize spending on dining at home over eating out.
Coca-Cola is fortunately aided by widespread product availability and strong brand awareness. Additionally, its plan to roll out smaller bottles and multipacks amid a time of less discretionary spending ought to assist top-line growth in the next quarter.
Coca-Cola CEO James Quincey highlighted back in October last year that the corporation will increase prices further in regions where expenses were rising, to pass the majority of them on to customers before a possible recession. He also suggested that the company was prepared for a downturn by investing in smaller and less expensive packaging, but that in any case, Coca-Cola’s products have traditionally been among the last to notice a decrease in demand during recessions.
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