Coca-Cola (KO) held on to its momentum to deliver another strong quarter on Tuesday. The soda giant beat Wall Street's estimates in Q2, led by global demand for its beverages, despite higher prices. Revenue grew 3% to $12.4 billion, compared to the expected $11.76 billion. Earnings per share came in 7% higher year-over-year at $0.84, compared to estimates of $0.81.
CEO James Quincey attributed the results to "a strong execution of the strategy." Consequently, the company is raising its 2024 guidance. "We're expressing a confidence in our ability to deliver on the 2024 guidance ... it's really a manifestation of confidence in our long-term strategy to create brands and to be able to work with our bottling partners to execute them," he said.
Overall, unit case volume jumped 2%, while pricing was up 9%. "You have to parse out a handful of countries that have very high inflation," like Argentina, Quincey said. "They are accounting for about half of the price mix." He added that without that, price in dollars is up 4%.
Headline inflation in the US and Europe is getting to the 3% range, reflecting in Coca-Cola's numbers. "Inflation ... is getting into the kind of normalized space," Quincey noted. The company raised its full-year guidance and now expects organic revenue to grow 9% to 10%, up from the previous estimate of 8% to 9%.
In the previous quarter, Coca-Cola reported $11.3 billion in revenue, beating Wall Street estimates of $10.96 billion, while its earnings per share of $0.72 also topped expectations of $0.70.
Amid cautious consumer spending, fast food chains like McDonald's (MCD), Burger King (QSR), and Taco Bell (YUM) are hoping to entice consumers with value and meal deals this summer. Coca-Cola reportedly played a role in the $5 meal bundle at McDonald's, which is now extended to August. A spokesperson mentioned that the company routinely partners with customers on marketing programs to meet consumer needs.
Quincey highlighted the continued pressure on lower-income consumers, who make up about 20% of Coca-Cola's US volumes, per JPMorgan analyst Andrea Teixeira. "Wages are starting to run ahead of overall inflation, but interest rates are still relatively high, and so they're economizing to some extent," Quincey explained. Consumers are visiting restaurant chains less, opting for value meals when they do, or trading down at grocery stores. "That's an ongoing effect. I don't think it's got particularly worse or particularly better in the second quarter. I think it's still a feature of what's going on," he said.
Coca-Cola saw unit case volume decrease 1% in North America as pricing jumped 11%. Year to date, shares are up 8%, lagging behind the S&P 500 (^GSPC) but far outperforming rival PepsiCo (PEP), whose shares are slightly down. PepsiCo reported earnings last week that beat estimates, but its US demand has weakened. CEO Ramon Laguarta mentioned that prolonged inflation has led to consumers perceiving food as expensive, prompting them to make budget-conscious choices.
Per Coca-Cola's release, it gained value share in total nonalcoholic ready-to-drink (NARTD) beverages. Quincey emphasized their strategy of being a total-beverage player with the revitalization of the Coke brand. When asked if Coca-Cola would venture beyond beverages, Quincey said, "I rarely say never ... chances of us being something other than beverages are very low."
Prior to the report, UBS analyst Peter Grom noted that consumer weakness is more concentrated on the convenient food side rather than beverages.
Key Q2 Metrics vs. Expectations (per Bloomberg consensus data):
Revenue: $12.4 billion (Expected: $11.76 billion)
Adjusted Earnings Per Share (EPS): $0.84 (Expected: $0.81)
Unit Case Volume Growth: 2.00% (Expected: 1.77%)
CEO James Quincey attributed the results to "a strong execution of the strategy." Consequently, the company is raising its 2024 guidance. "We're expressing a confidence in our ability to deliver on the 2024 guidance ... it's really a manifestation of confidence in our long-term strategy to create brands and to be able to work with our bottling partners to execute them," he said.
Overall, unit case volume jumped 2%, while pricing was up 9%. "You have to parse out a handful of countries that have very high inflation," like Argentina, Quincey said. "They are accounting for about half of the price mix." He added that without that, price in dollars is up 4%.
Headline inflation in the US and Europe is getting to the 3% range, reflecting in Coca-Cola's numbers. "Inflation ... is getting into the kind of normalized space," Quincey noted. The company raised its full-year guidance and now expects organic revenue to grow 9% to 10%, up from the previous estimate of 8% to 9%.
In the previous quarter, Coca-Cola reported $11.3 billion in revenue, beating Wall Street estimates of $10.96 billion, while its earnings per share of $0.72 also topped expectations of $0.70.
Amid cautious consumer spending, fast food chains like McDonald's (MCD), Burger King (QSR), and Taco Bell (YUM) are hoping to entice consumers with value and meal deals this summer. Coca-Cola reportedly played a role in the $5 meal bundle at McDonald's, which is now extended to August. A spokesperson mentioned that the company routinely partners with customers on marketing programs to meet consumer needs.
Quincey highlighted the continued pressure on lower-income consumers, who make up about 20% of Coca-Cola's US volumes, per JPMorgan analyst Andrea Teixeira. "Wages are starting to run ahead of overall inflation, but interest rates are still relatively high, and so they're economizing to some extent," Quincey explained. Consumers are visiting restaurant chains less, opting for value meals when they do, or trading down at grocery stores. "That's an ongoing effect. I don't think it's got particularly worse or particularly better in the second quarter. I think it's still a feature of what's going on," he said.
Coca-Cola saw unit case volume decrease 1% in North America as pricing jumped 11%. Year to date, shares are up 8%, lagging behind the S&P 500 (^GSPC) but far outperforming rival PepsiCo (PEP), whose shares are slightly down. PepsiCo reported earnings last week that beat estimates, but its US demand has weakened. CEO Ramon Laguarta mentioned that prolonged inflation has led to consumers perceiving food as expensive, prompting them to make budget-conscious choices.
Per Coca-Cola's release, it gained value share in total nonalcoholic ready-to-drink (NARTD) beverages. Quincey emphasized their strategy of being a total-beverage player with the revitalization of the Coke brand. When asked if Coca-Cola would venture beyond beverages, Quincey said, "I rarely say never ... chances of us being something other than beverages are very low."
Prior to the report, UBS analyst Peter Grom noted that consumer weakness is more concentrated on the convenient food side rather than beverages.
Key Q2 Metrics vs. Expectations (per Bloomberg consensus data):
Revenue: $12.4 billion (Expected: $11.76 billion)
Adjusted Earnings Per Share (EPS): $0.84 (Expected: $0.81)
Unit Case Volume Growth: 2.00% (Expected: 1.77%)