Coca-Cola shares higher after company reports 12% organic revenue growth

Coca-Cola (KO) announced its earnings report for the fourth quarter of the fiscal year. The stock is reacting favorably to results as organic revenue grew an impressive 12% on a mix of price and volume improvement. The stock will test key resistance at the $60-61 area. 

The company reported adjusted earnings per share (EPS) of $0.49, in line with the consensus estimate. The decrease in reported EPS was primarily due to a 14- point currency headwind, but the comparable EPS growth demonstrates the company's underlying strength. For the full year, Coca-Cola achieved a 13% increase in EPS to $2.47, with comparable EPS growing 8% to $2.69.

Revenues for the quarter increased by 6.9% year-over-year to $10.8 billion, slightly surpassing the FactSet consensus of $10.68 billion. 

One of the key highlights of Coca-Cola's performance is the growth in organic revenues. The company experienced a 12% growth in organic revenues for both the quarter and the full year. This is indicative of the company's successful strategies in driving sales without relying on acquisitions or structural changes. This growth was driven by a 9% increase in price/mix and a 3% increase in concentrate sales.

Global unit case volume also increased by 2% for both the quarter and the full year. 

Coca- Cola's comparable operating margin improved to 23.1% for the quarter, compared to 22.7% in the previous year. This expansion was primarily driven by strong top-line growth, although it was partly offset by increased marketing investments and currency headwinds. 

For the full year, comparable operating margin reached 29.1%, up from 28.7% in the prior year. The company's cash flow from operations for the full year reached $11.6 billion, representing a 5% increase compared to the previous year. This growth was driven by strong business performance and working capital initiatives. However, a transition tax payment and currency headwinds partially offset the positive impact. 

Free cash flow (non -GAAP) rose by 2% to $9.7 billion for the full year.

Looking ahead, Coca-Cola provided its outlook for the fiscal year. The company anticipates organic revenue growth of 6-7%. However, it expects a 2-3% currency headwind and a 4-5% headwind from acquisitions, divestitures, and structural changes when considering comparable net revenues. Despite these challenges, Coca-Cola aims to deliver strong growth. 

In terms of earnings per share, the company forecasts an 8-10% growth in comparable currency neutral EPS (non-GAAP) and a 4-5% growth in comparable EPS (non-GAAP) for the fiscal year. This projection includes the impact of currency headwinds and changes related to acquisitions, divestitures, and structural factors. The underlying effective tax rate (non-GAAP) is estimated to be 19.2%, not accounting for the ongoing tax litigation with the IRS.

Coca-Cola also expects to generate approximately $9.2 billion in free cash flow (non-GAAP) through cash flow from operations of approximately $11.4 billion, after deducting capital expenditures of about $2.2 billion. However, the company does not include any potential payments related to the ongoing tax litigation with the IRS in its cash flow projections. 

Overall, Coca-Cola's earnings report reflects a solid performance in terms of revenue growth, operating margin expansion, and organic revenue increases. The company's ability to deliver steady growth and navigate currency headwinds showcases its resilience. With positive projections for the fiscal year, Coca-Cola remains well-positioned to continue its success in the market.