The Coca-Cola Company KO has reported fourth-quarter 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Earnings and sales also improved year over year. The company’s results have benefited from its continued business momentum. KO has outlined its view for 2024.
Comparable earnings of 49 cents per share improved 10% from the year-ago period and beat the Zacks Consensus Estimate of 48 cents. However, unfavorable currency translations hurt comparable earnings by 13 percentage points. Comparable currency-neutral earnings per share rose 23% year over year.
Revenues of $10,849 million surpassed the Zacks Consensus Estimate of $10,645 million and improved 7% year over year. Organic revenues rose 12% from the prior-year quarter. Coca-Cola’s top line benefited from strong revenue growth across most of its operating segments, aided by an improved price/mix and increased concentrate sales. In the reported quarter, Coca-Cola gained a global value share in total non-alcoholic ready-to-drink beverages.
The Zacks Rank #3 (Hold) stock has risen 4.6% in the past three months compared with the industry’s growth of 4.9%.
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Volume & Pricing
In the reported quarter, concentrate sales rose 3% year over year, whereas the price/mix improved 9%. The price/mix benefited from pricing actions in the marketplace, including the impacts of hyperinflationary markets, and a favorable mix. In the quarter, concentrate sales were one point higher than unit case volume.
Coca-Cola’s total unit case volume increased 2% year over year in the fourth quarter. The unit case volume for the developed markets was flat with the prior-year quarter on growth in Mexico and Germany, offset by declines in the United States and Chile. The volumes for the developing and emerging markets also improved 4% on growth in India and Brazil.
Our model had predicted year-over-year organic revenue growth of 8.8% for the fourth quarter, with a 6.9% gain from price/mix and 1.9% growth in concentrate sales volume. For 2023, our model estimated organic sales growth of 10.7%, including a 9.3% price/mix gain and a 1.5% rise in concentrate sales volume.
Coming to the category cluster performance, the unit case volume increased 2% year over year for sparkling soft drinks. The sparkling soft drinks category benefited from growth in Latin America and the Asia Pacific. The trademark Coca-Cola reported 2% growth in volumes, whereas Coca-Cola Zero Sugar witnessed a 4% rise. Meanwhile, the sparkling flavors category reported an increase of 1% due to gains in the Asia Pacific.
Volumes for juice, value-added dairy and plant-based beverages were up 6% in the fourth quarter. Strong growth in Minute Maid Pulpy in China, Mazoe in Africa and fairlife in the United States aided the company’s performance.
Unit volumes for the water, sports, coffee and tea category were flat year over year in the fourth quarter. Coca-Cola witnessed 1% volume growth in the water category, driven by gains in Latin America. Sports drinks fell 1%. The coffee business improved 7% on strong Costa coffee performances in the U.K. and China. Tea volume was flat on growth in Latin America and EMEA, offset by declines in North America and do??adan in Türkiye.
CocaCola Company (The) Price, Consensus and EPS Surprise
CocaCola Company (The) Price, Consensus and EPS Surprise
CocaCola Company (The) price-consensus-eps-surprise-chart | CocaCola Company (The) Quote
Segmental Details
Revenues rose 16% year over year for Latin America, 11% for EMEA, 5% for North America, 7% for the Asia Pacific, 10% for Global Ventures, and 2% for Bottling Investments.
Organic revenues improved 25% year over year in EMEA, 5% in North America, 23% in Latin America, 13% in the Asia Pacific, 5% in Global Ventures and 14% in Bottling Investments.
Margins
In dollar terms, the operating income increased 10% year over year to $2,273 million, including an 11-point impact of currency headwinds. Comparable operating income rose 9.1% year over year. Comparable currency-neutral operating income advanced 20% on strong organic revenue growth across all segments, offset by higher marketing investments.
The operating margin of 21% in the fourth quarter expanded 50 basis points (bps) from 20.5% in the prior-year quarter. The comparable operating margin expanded 40 bps to 23.1%.
Our model had predicted the fourth-quarter adjusted operating margin to be flat year over year at 22.8% on 50-bps growth in the gross margin, mostly offset by a 40-bps increase in the selling, general and administrative expense rate.
Guidance
Management has outlined its view for 2024. It anticipates organic revenue growth of 6-7 for 2024. Comparable revenues are expected to include a 3-4% currency headwind based on current rates. The guidance includes a 4-5% negative impact of acquisition and divestiture. It anticipates an underlying effective tax rate of 19.2% for 2024.
Comparable currency-neutral earnings per share are estimated to increase 8-10% year over year. The company anticipates year-over-year comparable earnings per share growth of 4-5% for 2024. Comparable earnings per share growth is likely to include a headwind of 4-5% from currency, and a 2% headwind from acquisitions and divestitures.
Management envisions an adjusted free cash flow of $9.2 billion for 2024, including $11.4 billion in cash flow from operations. Capital expenditure is likely to be $2.2 billion.
For first-quarter 2024, comparable revenues are expected to include a 4% currency headwind, and a 2% negative impact of acquisitions, divestitures and structural changes. Comparable earnings per share are estimated to include a currency headwind of 8%, and a 1% negative impact of acquisitions, divestitures and structural changes.
Stocks to Consider
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Coca-Cola FEMSA KOF, The Boston Beer Company SAM and Molson Coors TAP.
Coca-Cola FEMSA currently flaunts a Zacks Rank #1 (Strong Buy). KOF shares have rallied 15% in the past three months. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Coca-Cola FEMSA’s current financial-year sales and EPS suggests growth of 25.8% and 28.2%, respectively, from the year-ago period’s reported figures. KOF has a trailing four-quarter earnings surprise of 16.5%, on average.
Boston Beer currently sports a Zacks Rank #1. SAM shares have risen 3.9% in the past three months. The company has a trailing four-quarter negative earnings surprise of 77.7%, on average.
The Zacks Consensus Estimate for Boston Beer’s current financial-year sales suggests a decline of 4.1% from the year-ago period’s reported figure. The consensus mark for the company’s earnings per share indicates growth of 2.7% from the year-ago quarter’s reported number.
Molson Coors has a trailing four-quarter earnings surprise of 41.3%, on average. It currently carries a Zacks Rank #2 (Buy). TAP shares have gained 4% in the past three months.
The Zacks Consensus Estimate for Molson Coors’ current financial-year sales and earnings suggests growth of 9.2% and 30.7%, respectively, from the year-ago period's reported figures.
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