Coca-Cola (KO) has exceeded analysts’ earnings expectations in eight out of the past ten quarters. However, the company’s earnings per share (or EPS), excluding one-time items, have fallen for the past nine consecutive quarters. In 2Q17, Coca-Cola’s earnings fell 1.7% on a year-over-year basis.
Recap of 2Q17 earnings
Coca-Cola’s adjusted EPS in 2Q17 reached $0.59. The company’s 2Q17 adjusted EPS exceeded the consensus analysts’ estimate of $0.57 but were lower than the adjusted EPS of $0.60 in 2Q16.
The year-over-year decline in the adjusted EPS was a result of lower revenues and unfavorable currency movements. The company’s bottom line in 2Q17 was also impacted by costs related to the refranchising of its bottling operations.
Analysts expect Coca-Cola’s adjusted EPS to remain unchanged on a year-over-year basis at $0.49 in 3Q17. The company expects acquisitions, divestitures, and other structural items to present a 9%–10% headwind on its 3Q17 profit before taxes.
Foreign currency fluctuations are expected to have a 2%–3% adverse impact on profits before taxes.
PepsiCo (PEP) delivered adjusted EPS of $1.48 in fiscal 3Q17, reflecting year-over-year growth of 5.7%. This growth was driven by a higher operating margin and a lower effective tax rate.
Coca-Cola revised its earnings guidance for fiscal 2017 in July 2017 due to the lower-than-expected impact of currency headwinds. Coca-Cola expects its adjusted EPS in 2017 to be flat to down 2% compared to $1.91 in 2016.
We’ll look at analysts’ recommendations for Coca-Cola stock in the next part of this series.