Yahoo Finance Coca-cola Raised Its Full-year Guidance: Should You Invest in the Company?
On Tuesday, October 24th, The Coca-Cola Company published better-than-expected third-quarter earnings and revenue and raised its yearly outlook, mostly thanks to rising volumes and positive growth prospects in most markets, which pushed the stock more than 3% higher at the US opening. While the KO shares are still down more than 11% since January, is it time to bet on the beverage firm? What are the growth prospects of the company? What are the risks?
The stock price remains nearly 12% lower since the beginning of the year. Following a decline that began in late July 2023 and hit its lowest point on October 6th, 2023, marking the lowest level since March 2021, KO shares experienced a recovery, gaining 8%.
After the release of the third-quarter results yesterday, the company’s shares started the day with an upward gap, rising above the Kijun line of the Ichimoku indicator, while the RSI indicator broke through the neutral level of 50.
When considering a further upward movement, the next resistance area to monitor is the red Ichimoku cloud and the 59.085 level. In the event of a downward trend, the subsequent support level to watch for is the 54.164 level.
A Few Key Figures About Coca-Cola’s Financial Performance in Q3 2023
Global unit case volume = +2%, including +2% in sparkling soft drinks,+2% in juice, value-added dairy and plant-based beverages, and +1% in water, sports, coffee and tea.
Net revenues = +8% to $12 billion, including +9% in price/mix and +2% in concentrate sales.
Operating income = +6%.
EPS = +9% to $0.71.
Coca-Cola has raised its full-year comparable earnings per share growth outlook from 5-6% to 7-8%.
The company has also increased its organic revenue forecast for the year from 8-9% to 10-11%.
Consult the company’s earnings press release for more details.
The Impact of Prices Hikes on Coca-Cola’s Volume Is Different From Pepsico’s
While Coca-Cola primarily focuses on beverages, Pepsico has a more diversified product portfolio as it also sells a wide variety of snack foods such as Frito-Lay, Quaker Oats, and Lay’s.
If Coca-Cola has historically held a larger market share in the carbonated soft drink industry compared to Pepsi, the latter can capture a broader market as its offerings go beyond drinks.
While both Coca-Cola and Pepsico have adjusted their annual projections for this year due to better-than-anticipated growth, their sales volumes didn’t follow the same trend in the last quarter.
Like many other companies, both beverage giants have responded to the rising costs of commodities over the past two years (directly impacting production expenses) by increasing the prices of their products.
In 2022 for instance, the average selling price of Coca-Cola products rose by 11%, while PepsiCo increased its prices by 14%.
Within the global carbonated beverage market, Coca-Cola and Pepsico have solidified their near-duopoly positions, enabling them to implement price changes without leading to a significant drop in consumer demand. Their enduring brand strength provides them with a distinct advantage in this regard.
Last July, The Coca-Cola Company announced its decision to halt further price hikes in the U.S. and Europe for the current year. Nevertheless, during this quarter, their prices increased by 9% compared to the same period in the previous year.
For the third quarter 2023, Coca-Cola declared that volume declined 1% in Europe, Middle East and Africa, while it grew 7% in Latin America, and stayed even in North America, as well as in Asia Pacific.
For comparison, Pepsico’s volume fell in North America by 6% last quarter, but increased 5% in Europe, by 3% in Africa, Middle East and South Asia, and by 1% in Asia Pacific, Australia and New Zealand and China Region.
A New Market for Coca-cola: Coca-cola and Pernod Ricard Partner to Offer a Ready-to-drink Pre-mixed Cocktail in 2024
As per Pernod Ricard’s statement, Coca-Cola is collaborating with the prominent French spirits company to introduce a premium pre-mixed cocktail featuring Absolut Vodka and Sprite.
This product is expected to be accessible in both regular Sprite and Sprite Zero Sugar variants and will be initially launched in specific European nations, such as the United Kingdom, the Netherlands, Spain, and Germany, in early 2024.
Partnering with the well-known Absolut Vodka brand enhances the allure of the pre-mixed cocktail, drawing on the brand strengths of both Coca-Cola and Absolut to create a more compelling product for consumers.
This move aligns with Coca-Cola’s strategy of becoming a total beverage company, diversifying its product range to cater to diverse consumer preferences.
This strategic step taps into a unique market segment represented by the alcohol ready-to-drink RTD space, targeting consumers seeking convenient and ready-to-enjoy alcoholic beverages, particularly in social and recreational settings among younger consumers.
Entering the alcohol RTD space also opens doors to different retail channels, including bars and liquor stores, expanding their presence beyond traditional soft drinks.
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This article was originally posted on FX Empire
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