Coke Sees Positive Price and Volume Growth

Wide-moat

We're encouraged that both carbonated and noncarbonated beverages saw positive volume gains in the quarter, with still drinks in particular enjoying a solid 5% growth rate (on top of similar gains in the same period a year ago). Coke enjoyed the strongest growth in its Eurasia and Africa segment, where sparkling beverages climbed 4% and non-carbonated leaped 7%, while still drinks climbed 5% in both Latin America and Asia Pacific. We continue to believe developing and emerging regions offer the highest long-run growth potential given lower per-capita consumption rates and faster-growing economies, and expect Coke to capitalize on its already-strong share position and sizable distribution network in these markets.

Coke's profitability also improved in the quarter after excluding sharply negative currency effects, with adjusted operating margins (excluding productivity and impairment charges) climbing 6% compared with the firm's 4% organic sales growth. Although we expect foreign exchange headwinds to persist for the full year, management's guidance for currency-neutral earnings per share growth in the mid-single-digit range mirrors our forecast.

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