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Coca Cola’s shares lose fizz despite upbeat sales

 

Wednesday, February 14, 2024

Today’s headlines

What’s happening: Shares of The Coca Cola Company slipped on Tuesday, after the company released results for its fourth quarter.

What happened: The beverage maker reported better-than-expected sales for the latest quarter on Tuesday amid higher demand for its juices, energy drinks and sodas.

However, Coca Cola’s shares came under pressure on profit growth concerns.

How were the results: The Atlanta, Georgia-based company reported single-digit growth in sales for the fourth quarter.

  • Net revenue rose 7.4% year-over-year to $10.95 billion, beating the consensus estimates of $10.68 billion.
  • Adjusted earnings came in at 49 cents per share, in-line with Wall Street expectations.

Why it matters: Although Coca Cola hiked prices of its products over several quarters, consumers continued spending money on drinks and snacks with an increase people dining out and going to movie theatres.

Coca Cola said its organic revenues grew by 12% last quarter, amid a 9% increase in price/mix and 3% in concentrate sales.

The latest growth in the company’s sales came in stark contrast with its peer PepsiCo, which last week announced its first decline in sales in 14 quarters.

Coke’s global unit case volume rose 2% during the latest quarter, while sparkling soft drinks increased 2%, amid growth in Latin America and Asia Pacific.

Sales in developing and emerging markets surged 4%, following growth in India and Brazil, while developed markets remained broadly flat, with a decline in the US and Chile and growth in Germany.

Operating margins for the fourth quarter widened to 21.0%, from 20.5% in the year-ago quarter. However, operating margins contracted in 2023 to 24.7%, from 25.4% in the previous year.

Management guided to organic revenue growth of 6%-7% and adjusted earnings growth of 4%-5% for 2024.

How shares responded: Coca Cola’s shares fell 0.6% to close at $59.35 on Tuesday, following the release of quarterly results. The stock has lost around 1% over the past month.

What to watch: Investors will continue monitoring price hikes by the company and the impact on volumes and sales. Markets will also monitor Coca Cola’s margins.

The markets today

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

Context: The GBP/EUR forex pair climbed to its strongest level in around six months, following the release of the UK’s wage growth report.

Details: Data released on Tuesday showed UK’s wage growth easing less than expected in the final three months of 2023, which resulted in speculations of the Bank of England pushing back its rate cuts.

UK wages, excluding bonuses, grew by 6.2% year-over-year to £626 per week. Although this marked a slowdown from the 6.7% growth recorded in the three months to November, the latest reading came in higher than market estimates of 6.0%. The UK’s unemployment rate declined to 3.8% and was better than market expectations of 4.0%.

Markets expect the BoE to announce rate cuts of less than 75 basis points (bps) in 2024, while the European Central Bank and US Federal Reserve are widely expected to lower rates by 120 bps and 110 bps, respectively, this year.

The sterling gained around 0.3% to 85.06 pence per euro on Tuesday, after reaching its highest level since August 23.

Some strength in the greenback exerted pressure on the GBP/USD forex pair. The annual inflation rate in the US declined to 3.1% in January, from 3.4% a month ago, but came in higher than market views of 2.9%. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.8% to 104.96 on Tuesday.

The GBP/USD forex pair fell around 0.3% to 1.2592 on Tuesday. London’s FTSE 100 declined by 0.81% to close at 7,512.28.

What to watch: Investors await the release of data on inflation rate and producer prices from the UK today. Annual inflation rate in the UK, which unexpectedly rose to 4% in December, is expected to accelerate again to 4.2% in January. Factory gate prices of goods produced by UK manufacturers, excluding food, beverages, tobacco and petroleum products, had declined by 0.6% in December and are projected to decline another 0.1% in January.

Other Markets: US trading indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.35%, 1.37% and 1.58%.

The news shaping the markets

The US Senate passed a foreign aid package worth $95 billion to provide funds for Ukraine, Israel and Taiwan. The news sent the safe-haven US dollar index to near three-month highs.


New Zealand’s annual food inflation eased to 4% in January, from 4.8% in the prior month. This being the lowest reading since November 2021 lent support to the NZD/USD forex pair.


The American Petroleum Institute said US crude stockpiles had climbed by 8.52 million barrels in the week ended February 9, following a rise of 674,000 barrels in the prior week, which sent the WTI crude oil prices lower this morning.


Poland’s trade deficit contracted to €556 million in December, from €2,208 million in the year-ago month. Despite this, the PLD/USD forex pair remained under pressure.


The Eurozone’s ZEW indicator of economic sentiment rose by 2.3 points to 25 in February, topping market estimates of 20.1. This being the strongest reading in a year sent the EUR/USD pair higher in forex trading this morning.

What else to watch today

India’s wholesale prices and total passenger vehicle sales, UK’s retail price index, Eurozone’s number of employed persons, GDP growth rate and industrial production, South Africa’s retail trade, US MBA mortgage applications, Producer price inflation, crude oil inventories, gasoline stocks change and distillate inventories, Canada’s new motor vehicle sales, Russia’s inflation rate, Spain’s consumer confidence indicator, Central Bank of Brazil’s focus market readout, as well as Argentina’s inflation rate.


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