Coca-Cola's stock gains after sales top forecasts, as prices and volume rose

By Tomi Kilgore

Case volume growth was strongest in juice, value-added dairy and plant-based beverages

Shares of Coca-Cola Co. turned lower Tuesday, but outperformed the selloff in the broader stock market, after the beverage giant reported fourth-quarter revenue that rose above Wall Street forecasts, fueled by increases in both price and volume.

Case volume saw the biggest growth in the juice, value-added dairy and plant-based beverage category, amid strength in the Fairlife brand in the U.S.

The stock (KO) erased an intraday gain of as much as 1.6% to slip 1% in morning trading. Meanwhile, the Dow Jones Industrial Average DJIA, of which the stock is a component, took a 455-point, or 1.2% dive, following disappointing inflation data.

Regarding inflation, Chief Executive James Quincey said on the post-earnings conference call that inflationary pressure are either moderating or stabilizing across most of the company's markets.

"In North America and Europe, while inflation is moderating, the cumulative impact of inflation is pressuring certain consumer segments who are seeking value," Quincey said, according to an AlphaSense transcript.

As a result, he said "affordability offerings" were increased throughout the 2023, allowing the company to increase volume and market share in both regions.

Quincey added that the value of Coca-Cola's brand increased by $8 billion in 2023. And Coke moved up seven notches to become the tenth most valuable brand in the world, according to brand consultant Kantar.

For the fourth quarter, net income slipped to $1.97 billion, or 46 cents a share, from $2.03 billion, or 47 cents a share, in the same period a year ago, as unfavorable current translation resulted in a 14 percentage-point negative impact on results.

Excluding nonrecurring items, adjusted earnings per share of 49 cents matched the FactSet consensus.

Revenue grew 7.2% to $10.85 billion, to beat the FactSet consensus of $10.68 billion, as price and mix increased 9% and concentrate sales rose 3%.

Unit case volume was up 2%. Developing and emerging markets grew 4%, while developed markets was flat, as growth in Mexico and Germany was offset by weakness in the U.S. and Chile.

Within the case volume growth, sparkling soft drinks grew 2%, as Coca-Cola volume was up 2%, with Coca-Cola Zero Sugar volume rising 4%, while sparking flavors increased 1%.

Juice, dairy and plant-based beverage sales increased 6%, helped by strength in Minute Maid Pulpy in China, Mazoe in Africa and Fairlife in the U.S.

And water, sports, coffee and tea sales rose 1%, as water volume gained 1% while sports drinks fell 1% and coffee declined 7%.

For 2024, the company expects adjusted EPS growth of 4% to 5%, compared with 8% growth in 2023. The current FactSet EPS consensus of $2.81 implies 4.5% growth.

CFRA analyst Garrett Nelson followed by cutting his rating on the stock to buy from strong buy, and trimming his price target to $66 from $68.

"While we believe the guidance reflects some conservatism, with EPS growth expected to slow and comps becoming more difficult, we lower our opinion one notch to buy," Nelson wrote i a note to clients. "While volumes were better than expected, it was an in-line quarter and guidance was also in line."

The stock has gained 3.8% over the past three months, while the Consumer Staples Select Sector SPDR ETF XLP has tacked on 5.2% and the Dow has advanced 11.7%.

-Tomi Kilgore

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02-13-24 1112ET

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