Coca-Cola (NYSE:KO) has reported a positive start to 2024, with its first-quarter earnings and revenue surpassing analyst expectations. The beverage giant announced adjusted earnings per share (EPS) of $0.72, edging out the consensus estimate of $0.70. Revenue for the quarter also exceeded forecasts, coming in at $11.3 billion against the anticipated $11.02 billion.
The company's net revenues grew by 3% compared to the same quarter last year, while organic revenues, which exclude the impact of currency fluctuations, acquisitions, and divestitures, saw an impressive 11% increase. This growth was attributed to a 13% rise in price/mix and despite a 2% decline in concentrate sales. The company's global unit case volume also experienced a modest 1% growth. Coca-Cola's operating income, however, saw a significant decline of 36%, primarily due to charges related to fairlife and BODYARMOR trademarks, as well as currency headwinds.
Chairman and CEO James Quincey expressed confidence in the company's trajectory, stating, "We’re encouraged by our start to 2024, delivering another quarter of volume, topline and earnings growth amidst a dynamic backdrop." The company's strategic marketing initiatives, such as the launch of Coca-Cola Happy Tears Zero Sugar and the Foodmarks by Coca-Cola campaign, have been instrumental in driving volume growth and market share gains.
The stock responded positively to the earnings report, initially rising 1.55%. However, it is currently flat on the day, as of 10:33 am ET.
Looking ahead, Coca-Cola has updated its full-year 2024 guidance, expecting organic revenue growth of 8% to 9%. The company anticipates a 4% to 5% currency headwind on comparable net revenues and a 7% to 8% currency headwind on comparable EPS growth. Despite these challenges, the company projects an 11% to 13% growth in comparable currency neutral EPS and a 4% to 5% growth in comparable EPS against the $2.69 reported in 2023.
For the second quarter of 2024, Coca-Cola forecasts a 6% currency headwind on comparable net revenues and an 8% to 9% currency headwind on comparable EPS growth. The company remains committed to delivering value to its shareholders, with an expected free cash flow of approximately $9.2 billion for the full year.
Quincey concluded with a forward-looking statement, "We believe our global system is primed for sustained success, thanks to the right strategies, clear alignment, a powerful portfolio, and strong execution."
Reacting to the report, analysts at Truist said they expected the stock to open flat on the solid quarter and guidance remaining relatively unchanged when including FX.
Analysts at Morgan Stanley said they see the metrics as "strong across income statement line items," but with FY EPS guidance not changing, they expected a muted stock reaction.
Analysts at Goldman Sachs stated: "While we think investors expected a strong Q1 from KO, particularly given PEP’s better than feared results last week, the magnitude of the beat caught us by surprise despite one less selling day in the quarter."
"We remain impressed by KO’s top-line momentum and execution in a very challenging environment, as it further positions itself well for healthy, sustainable, l.t. growth. That said, we continue to see a neutral risk/reward given KO’s ongoing litigation with the IRS and potential tax liabilities," they added.
Analysts at Jefferies note that the earnings beat was driven by broad-based topline strength and margin expansion. The momentum is "expected to continue resulting in a higher organic outlook, though incremental Fx headwinds keep bottom-line expectations unchanged," said the firm.