KO slides to two month lows despite top and bottom line beat
1min read Coca-Cola (KO) reported better-than-expected Q3 results, with EPS of $0.77 beating estimates of $0.74, and revenue of $11.9 billion surpassing the $11.6 billion consensus. The company saw a 9% organic revenue growth, driven by a 10% increase in price/mix, though global unit case volume declined by 1%. Coca-Cola maintained its full-year guidance, expecting adjusted EPS to grow by 5%-6% in 2024.
Shares slipped lower following the news. This has more to do with the downside trajectory of consumer staples rather than a reflection of the results. There is support at the $68 level as it holds the lower end of the Bollinger band on the daily and the 20-day MA on the weekly chart. A failure to hold this level will set up a test of the 200-day MA at $64.
Operating margins were affected by one-time charges, including a $919 million remeasurement of contingent consideration for its acquisition of fairlife, LLC. Despite this, comparable operating margins improved to 30.7%, up from 29.7% last year. The company highlighted that currency headwinds impacted both operating income and EPS performance, with EPS declining 7% year-over-year to $0.66.
Regionally, Europe, the Middle East, and Africa saw a 2% decline in unit case volume, driven by declines in key products like Trademark Coca-Cola and sparkling flavors. Price/mix grew 9% due to inflation-driven pricing actions, but operating income faced a 12-point currency headwind. In Latin America, unit case volume remained flat, with price/mix increasing by 21%, driven primarily by inflationary pricing in Argentina.
North America's unit case volume remained flat as well, with growth in certain products offset by declines in others. Price/mix improved by 11%, driven by favorable mix and pricing actions. Operating income grew 10%, bolstered by strong organic revenue growth, though higher input costs and marketing investments were noted.
In Asia Pacific, unit case volume fell by 2%, but price/mix grew by 7%. The region was challenged by declines in water, sports, coffee, and tea segments. Operating income fell by 7%, with a substantial 18-point currency headwind, but on a currency-neutral basis, income grew by 12%.
Coca-Cola gained value share in total non-alcoholic ready-to-drink (NARTD) beverages in several regions, including the Philippines, Japan, and South Korea. However, the company lost share in Latin America, particularly in Mexico and Brazil, which impacted overall performance in the region.
Despite headwinds in certain segments and regions, Coca-Cola continues to see solid organic revenue growth, driven by pricing strategies and strong market presence. The company’s strong cash flow generation and ongoing efforts to manage costs provide a stable foundation for continued growth, as reflected in its reaffirmed guidance for 2024.
