Coca-Cola Stock Rose Due to Revenue Outlook and Q2 Results

On Tuesday, Coca-Cola (KO) stock rose 5.7% as of 10:48 AM ET. The company announced strong second-quarter results and raised its fiscal revenue outlook.

Sirisha Bhogaraju - Author

Jul. 23 2019, Updated 12:06 p.m. ET

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On Tuesday, Coca-Cola (KO) stock rose 5.7% as of 10:48 AM ET. The company announced strong second-quarter results and raised its fiscal revenue outlook.

The company’s second-quarter revenues rose 6.1% to $10 billion—marginally ahead of analysts’ forecast of $9.99 billion. The company’s organic revenue growth was 6%. Coca-Cola’s top-line growth was boosted by a 4% rise in concentrate sales and a 2% favorable impact of price and mix. However, currency headwinds had a 6% negative impact on the company’s second-quarter revenues.

PepsiCo’s (PEP) revenues rose 2.2% on a reported basis and 4.5% on an organic basis in the second quarter.

Coca-Cola’s adjusted EPS increased to $0.63 in the second quarter compared to $0.60 in the second quarter of 2018. Analysts expected an adjusted EPS of $0.61.

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Coca-Cola’s volumes increased

Coca-Cola’s unit case volumes grew 3.0% in the second quarter due to strength in developing and emerging markets. Continued innovation, strategic acquisitions, and marketing efforts have enhanced the company’s volumes. The company’s new products include Coca-Cola Plus Coffee and Coca-Cola Energy.

The company also collaborated with Netflix to bring back 1985’s New Coke for season 3 of the popular series Stranger Things.

The company’s sparkling soft drinks category generated 3% volume growth in the second quarter due to the strong performance of the trademark Coca-Cola line. Coca-Cola Zero Sugar had double-digit volume growth for the seventh consecutive quarter.

For the juice, dairy, and plant-based beverages category, the volumes were even on a YoY basis. Strength in the Maaza brand in India and the Innocent business in Europe was offset by lower volumes in the Middle East juice brand Rani.

The water, enhanced water, and sports drinks category generated 2% volume growth due to strength in the Ciel and Cristal brands in Mexico and the Kinley brand in India.

However, the company’s tea and coffee volumes fell 3% in the second quarter due to lower volumes for the Dogadan tea business in Turkey and tea brands in Japan.

Weakness in North America

Coca-Cola’s overall unit case volumes increased in the second quarter. However, the volumes fell 1% in North America on a YoY basis. The PepsiCo North America Beverages segment’s volumes fell 2% in the second quarter. The segment’s soda volumes fell 3%, while non-soda volumes fell 1%.

Both of the beverage giants are struggling to improve soda volumes in North America. Consumers are rapidly drifting to healthier beverage choices.

Coca-Cola’s upgraded outlook

Coca-Cola upgraded its revenue outlook for fiscal 2019 after its stellar performance in the first half of the year. The company expects organic revenue growth of 5% in 2019 compared to the previous estimate of 4%.

The adjusted EPS growth forecast remains unchanged in the -1%–1% range for 2019.

Coca-Cola plans to enhance its beverage portfolio offerings with healthier beverage choices. In the second quarter, the company launched Costa Coffee in the United Kingdom. Costa Coffee is a ready-to-drink product. Coca-Cola will roll-out the product in additional markets in the second half of 2019.

Coca-Cola acquired Costa Coffee for $4.9 billion earlier this year. Under an agreement with Coca-Cola HBC AG, Costa Coffee will be launched in at least ten markets in 2020.

The company also launched Coca-Cola Energy in select European markets in the second quarter. The company plans to make Coca-Cola Energy available in 20 markets by the end of this year.


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