20 April 2021

Coca-Cola Reports Sparkling Q1 Results

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What’s happening: Shares of Coca-Cola rose slightly on Monday, after the company reported its first-quarter results ahead of expectations.

What happened: Coca-Cola reported quarterly sales growth for the first time after four quarters of decline.

The company said volumes, which is a key indicator of demand, had returned to pre-pandemic levels. The beverages giant also made a major announcement about its African bottling operations.

How were the results: Although Coca-Cola’s revenues grew, its earnings shrank from the year-ago figure.

  • Revenues climbed 5% to $9.02 billion, exceeding market expectations of $8.68 billion.
  • Earnings came in at $2.25 billion, or 52 cents per share, versus 64 cents per share in the same quarter last year.
  • Excludes onetime items, earnings stood at 55 cents a share, surpassing the consensus estimate of 50 cents per share.

Why it matters: Coca-Cola’s global unit case volume returned to the 2019 levels in March, helped by the reopening of stores and restaurants amid accelerating vaccine rollouts by countries around the world.

The soda maker reported sales growth in Asia, with consumers returning to pre-pandemic routines. Coca-Cola warned, however, that the recovery ahead could be uneven due to spiking covid-19 cases in some nations. India, one of the company’s major markets, announced lockdowns in several states to curb the steep rise in infections. On the other hand, regions like Latin America and Africa are reporting a drop in covid-19 vaccine distribution.

“Whilst we've got back above the line of flotation in March, there's no guarantee there won't be some extra degree of lockdowns in May or September or December that then puts pressure back on the business,” CEO James Quincey said.

The company also announced plans to sell its stake in CCBA (Coca-Cola Beverages Africa) and to list the unit as a publicly traded company in the next 18 months.

“A standalone listing for CCBA will enable the bottler to build on its growth trajectory and access capital independently to meet the investment needs of the business, which is great for stakeholders across Africa,” CCBA CEO Jacques Vermeulen said.

Management reaffirmed their guidance for 2021 sales, projecting high single digit growth. The company expects comparable earnings growth to be in the range of high single digits to low double digits.

How shares responded: Coca-Cola’s shares rose 0.6% to close at $54.00 on Monday following the release of quarterly results. The stock has gained more than 11% in the past three months.

What to watch: Investors will monitor rising infections, lockdown announcements and the pace of vaccinations globally.

The Markets Today

     

The British pound will be in focus today ahead of economic data from the UK.

Context: The GBP/USD forex pair climbed to a one-month high on Monday, ahead of a busy data week that is likely to offer more evidence of a recovery in the economy.

Details: The British pound recorded a strong first quarter, driven by an uptick in vaccine rollout in the country and abating fears of the central bank taking its benchmark interest rate to the negative territory.

With the reopening of retail stores, gyms and salons in the UK, various analysts expect the British economy to rebound at a faster rate than the EU, which is seeing another wave of covid-19 infections.

“GBP continues to find support on dips and it seems like investors are happy enough staying positioned for the 2Q UK re-opening story,” ING analyst Chris Turner said in a note.

Meanwhile, the number of people visiting stores across the UK surged by a whopping 87.8% last week, following the reopening of non-essential stores after three months of lockdown, according to figures released by Springboard, which measures footfall in retail outlets and malls.

The GBP/USD gained around 1% to settle at 1.3985 on Monday. The forex pair was also boosted by continued weakness in the US dollar.

What to watch: Traders await data on claimant count change, employment change and unemployment rate from the UK. The unemployment rate, which eased to 5% in the three months to January, is expected to rise slightly to 5.1% in February.

Investors will also keep an eye on the flash April PMIs, retail sales, CPI and PPI, scheduled for release later this week.

Rising covid-19 cases remain one of the top concerns for markets as global infections surged past 36 million.

Other Markets: US indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.36%, 0.53% and 0.96%, respectively.

Support & Resistances
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Futures at 0400 (GMT)

What else to watch today

     

Germany’s producer prices, South Africa’s composite leading business cycle indicator, Bank Indonesia’s interest rate decision, Italy’s current account, Turkey’s government debt, Russia's unemployment rate, retail trade, gross domestic product and real wage growth as well as the US Redbook index and API crude oil stockpiles.

 

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