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Will Coca-Cola’s Organic Revenue Growth Impress in Q4?

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Analysts’ expectations

The Coca-Cola Company (KO) has surpassed analysts’ revenue estimates for the past nine quarters. However, Coca-Cola’s revenue has fallen for 14 straight quarters, reflecting the impact of the company’s refranchising of its bottling operations.

The company’s third-quarter revenue fell 9.2% to $8.25 billion but exceeded analysts’ expectation of $8.17 billion. Excluding the impact of its refranchising of its bottling operations, Coca-Cola’s revenue rose 6% on an organic basis in the quarter.

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Coca-Cola’s third-quarter organic revenue growth was driven by higher concentrate sales and the impact of favorable price and mix. The company’s third-quarter unit case volume growth of 2% was the result of the strong performance of its trademark Coca-Cola brand and its Fuze Tea and Smartwater brands.

Coca-Cola has been investing in innovation and marketing to improve its volumes and revenue. Aside from organic innovation, the company is expanding its portfolio with strategic acquisitions. It’s looking to expand in the hot beverage space with the $4.9 billion acquisition of British coffee company Costa, which it completed in January 2019.

Coca-Cola also completed the acquisition of Nigeria’s Chi Limited in January 2019. The company initially acquired a minority stake in Chi Limited, a leading maker of juices and value-added dairy, in 2016.

Coca-Cola also enhanced its better beverage portfolio with the acquisition of stakes in Organic & Raw Company, the maker of MOJO Kombucha drinks, and Made Group, an Australian beverage maker.

Revenue guidance

Analysts expect Coca-Cola’s revenue to fall 6.3% to $7.0 billion in the fourth quarter and fall 10.0% to $31.9 billion in 2018. This expected revenue decline reflects the impact of the company’s refranchising of its bottling business. Coca-Cola expects organic revenue growth of at least 4% in 2018.

We’ll discuss expectations for Coca-Cola’s earnings in the next part of this series.

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