Coca-Cola Q3 Earnings Beat Estimates as Sales Rise 7%

The Coca-Cola Company reported third quarter results on October 27 that beat Wall Street expectations, and it raised its full year guidance. The Coca-Cola Q3 earnings release showed net revenues up 7% to $13.4 billion, with global unit case volume up 5%. Comparable earnings per share rose 11% to $0.91, above the $0.88 analysts had expected. Reported earnings per share rose 8% to $0.93.

The quarter ended on October 3. Organic revenues grew 7%, driven by a 7% increase in concentrate sales and 1% growth in price and mix. Concentrate sales ran 2 points ahead of unit case volume because of the timing of concentrate shipments. Operating income grew 12%, and comparable currency neutral operating income grew 8%. Operating margin was 33.4%, against 32.0% in the prior year, while comparable operating margin was 32.9%, against 31.9% a year earlier. The company said margin expansion came from organic revenue growth and currency tailwinds, partly offset by higher marketing investment and higher operating expenses.

Beating the Street

Analysts had expected earnings of about $0.88 per share on revenue of about $12.9 billion. The Coca-Cola Q3 earnings figures topped both marks, with comparable earnings of $0.91 per share and revenue of $13.4 billion. The company also said it gained value share in total nonalcoholic ready-to-drink beverages. Shares traded higher in early action on Tuesday after the report.

The result extended a run of earnings beats. In the second quarter, comparable earnings were $0.97 per share, up 11%, on organic revenue growth of 6% and unit case volume growth of 5%, led by India, China, the United States and Brazil. The third quarter kept that pace even with tougher comparisons and six fewer selling days than the prior year period, a factor management had flagged in July.

A higher outlook

Chief executive Henrique Braun said the quarter showed sustained momentum across the system. "Our results this quarter demonstrate our system's sustained momentum, giving us confidence in our updated full year guidance," Braun said. "By staying close to consumers and executing with agility across our global system, we are delivering quality growth while continuing to invest in the capabilities, brands and people that will fuel our future."

The Coca-Cola Q3 earnings beat gave the company room to lift its outlook. In July, the company had already raised its full year guidance to about 5% organic revenue growth and 9% to 10% comparable earnings growth, with free cash flow of about $12.4 billion. The October 27 release said the updated guidance reflected that momentum, and investors read the Coca-Cola Q3 earnings as a sign that demand held up through a choppy consumer backdrop.

Coca-Cola revenue growth in the quarter came from concentrate sales rather than price alone. The Coca-Cola Q3 earnings release put Coca-Cola revenue at $13.4 billion for the quarter. Price and mix added 1%, while concentrate sales added 7%, so volume and shipments did most of the work. Organic revenue rose 7% for the second time in three quarters, after 10% in the first quarter and 6% in the second. The company pointed to marketing around the FIFA World Cup as one support for volumes earlier in the year, and to gains in India, China, the United States and Brazil.

The Coca-Cola Q3 earnings report also showed the balance between growth and cost. Marketing investment rose, and operating expenses rose with it, but revenue growth and currency tailwinds still widened margins by more than a point on both a reported and a comparable basis. Currency added 2 points to both reported and comparable earnings per share performance, the company said.

On October 15, the board declared a regular quarterly dividend of $0.53 per share, payable December 15 to shareowners of record at the close of business on December 1.