Coca-Cola (KO) Q3 2022 earnings

Coca-Cola earnings beat across top and bottom lines

Coca-Cola on Tuesday raised its full-year outlook, predicting that its two-pronged strategy of hiking prices and offering more affordable options will keep driving sales growth.

Inflation is expected to keep raising Coke’s expenses in 2023, and executives signalled that more price hikes could be on the way over the next 12 months. Foreign currency is also projected to weigh on Coke’s earnings and revenue next year. However, the company won’t provide its full 2023 outlook until February.

Shares of the company rose 1% in morning trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: 69 cents adjusted vs. 64 cents expected
  • Revenue: $11.05 billion adjusted vs. $10.52 billion expected

Coke’s adjusted net sales rose 10% to $11.05 billion, topping expectations of $10.52 billion. Organic revenue climbed 16%, fueled by higher prices across Coke’s portfolio.

Unit case volume, which strips out the impact of currency and price changes, grew 4% in the quarter. Other consumer giants, like Tide maker Procter & Gamble, have seen their volume fall as consumers feel inflation hit their wallets. Coke CEO James Quincey said that the company is seeing some changes in consumer behavior.

“Europe is probably the most obvious example,” Quincey told analysts on the company’s conference call. “In the at-home channel, you can see growth in private label across a number of categories. In beverages, you can see it tick up a little in water and juices.”

Globally, the company grew its market share during the third quarter. Coke is trying to appeal to budget-conscious consumers through product offerings like value packs in North America that contain fewer cans or use smaller bottles. Returnable bottles have also helped Coke keep prices down in developing markets since it saves on packaging costs.

Quincey said tough economic conditions will likely persist for the next six to 12 months. He also told analysts that product innovation in 2023 will focus more on packaging to create more affordable options.

Coke’s sparkling soft drinks segment, which includes its namesake soda, reported volume growth of 3%. Coke Zero Sugar was once again a standout, with its volume rising 11% in the quarter.

The company’s hydration, sports, coffee and tea division saw volume growth of 5%, fueled by Powerade, Bodyarmor and the expansion of Costa Coffee.

Coke’s nutrition, juice, dairy and plant-based beverages division reported flat volume for the quarter. Coke said the lackluster performance was due to declining demand for local brands in Eastern Europe.

The beverage giant reported third-quarter net income of $2.83 billion, or 65 cents per share, up from $2.47 billion, or 57 cents per share, a year earlier.

Excluding items, Coke earned 69 cents per share.

For 2022, Coke now expects adjusted earnings per share growth of 6% to 7%, up from its prior range of 5% to 6%. The company also raised its outlook for organic revenue growth to 14% to 15% from a range of 12% to 13%.

In the fourth quarter, Coke is forecasting that foreign currency will weigh on its adjusted net sales by 8% and adjusted earnings per share by 9%, including the impact of hedged positions.

Source: https://www.cnbc.com/2022/10/25/coca-cola-ko-q3-2022-earnings.html