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How Coca-Cola Delivered Better-than-Expected 3Q17 Results

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How Coca-Cola Delivered Better-than-Expected 3Q17 Results PART 1 OF 6

This Likely Drove Coca-Cola’s 3Q17 Earnings

Earnings beat estimates

Soda giant Coca-Cola (KO) beat the analysts’ earnings expectations for the second-straight quarter in 3Q17. Coca-Cola announced its 3Q17 results on October 25.

Excluding one-time items, the company delivered adjusted EPS (earnings per share) of $0.50 in 3Q17, surpassing the consensus analysts’ estimate of $0.49.

This Likely Drove Coca-Cola’s 3Q17 Earnings

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More on 3Q17 earnings

Coca-Cola’ 3Q17 adjusted EPS grew 2.0% on a YoY (year-over-year) basis. This growth came in after nine consecutive quarters of YoY declines in the company’s adjusted EPS.

The growth in the company’s 3Q17 adjusted EPS was driven by its ongoing productivity initiatives. In particular, significant operating margin expansion helped the company’s bottom line in 3Q17 to grow despite the decline in revenue.

Performance of rivals

PepsiCo’s (PEP) adjusted EPS grew 5.7% to $1.48 in fiscal 3Q17. This growth was a result of a higher operating margin and a lower effective tax rate. Dr Pepper Snapple (DPS) also reported its 3Q17 results on October 25. The company’s 3Q17 adjusted EPS of $1.10 declined by about 6.0% on a year-over-year basis. This decline was caused by the recent natural disasters in the US and Mexico and the write-off of a prepaid resin inventory.

Company’s outlook 

Coca-Cola expects its adjusted EPS to be flat at 2% for fiscal 2017, compared with $1.91 in 2016. The company expects currency headwinds to have a 1.0% adverse impact on 2017 pre-tax income. Structural headwinds primarily related to the refranchising of the company’s bottling operations are expected to have a 6.0%–7.0% negative impact on the company’s 2017 pre-tax income.

We’ll discuss the company’s revenue performance in the next part of this series (below).

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