Coca-Cola beats earnings as it overrides flat volume with innovation and pricing:
- Coke is coming off a strong third quarter in which it battled a shrinking market for its core products with new products and higher prices.
- Rival Pepsi has seen beverage sales in North America drop as industry challenges continue to intensify.
Here's how the company did compared with expectations in a survey of analysts by Thomson Reuters:
- EPS: 39 cents vs. the expected 38 cents.
- Revenue: $7.51 billion vs. $7.37 billion.
- Organic sales growth: 6 percent vs. 3.65 percent.
Coca-Cola's net revenue declined 20 percent for the quarter. The company attributed that to headwinds from its efforts to refranchise its bottling operations. Organic sales, which excludes the impacts of foreign exchange and other changes, were up 6 percent for the quarter.
Earnings in the latest period were hurt by a $3.6 billion one-time charge related to new U.S. tax laws. The company reported adjusted earnings 39 cents per share, topping analysts' estimates by a penny a share.
Shares of the beverage giant were up 2.3 percent in premarket trading on Friday.
As with last quarter, beverage volume growth stayed even. The company offset its flat volume by raising prices and selling more of its expensive products.
For the year, Coke reported net sales of $35.4 billion, a 15 percent drop from last year.
Its strongest performing beverages were sports drinks and water. Water sales, including Dasani, grew 2 percent for the quarter, as did coffee and tea beverages, such as Honest Tea. Carbonated soft drinks stayed flat and its juice, dairy, and plant-based beverages declined 2 percent.
"Coca-Cola continues to do a good job driving relevancy with consumers and leveraging innovation and mix to drive solid pricing growth," said Bonnie Herzog an analyst with Wells Fargo, though she added that flat volume growth "remains a concern."
Coca-Cola is coming off a strong fiscal third quarter in which it battled shrinking a market for its core products through new products and higher prices. This January, it continued its innovation push, launching four new flavors of Diet Coke.
Investors will be looking to see if innovation, product mix and pricing alone can continue to drive the company's sales growth, particularly in the U.S. where the retail landscape is tightening and Coca-Cola's archrival PepsiCo continues to see soda sales decline.
On Thursday, Coca-Cola said it boosted its annual dividend by 5.4 percent to $1.56 a share from $1.48 a share in 2017. It also announced two new nominees to its board, Christopher Davis, chairman of Davis Advisors, and Caroline Tsay, CEO of Compute Software.