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Trends & Analysis
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Trends & Analysis
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Coca-Cola’s shares slide despite upbeat sales

 

Wednesday, February 15, 2023

The news shaping the markets today

Russia is reportedly assembling fighter jets near its border with Ukraine and may be planning a massive air attack. The safe-haven US dollar index rose this morning.


The People’s Bank of China held its interest rate at 2.75% on Wednesday, sending the CNY/USD pair lower in forex trading this morning.


The American Petroleum Institute said that US crude stockpiles had risen by 10.507 million barrels in the week ended February 10, compared to a decline of 2.184 million barrels in the prior week. WTI crude oil futures fell this morning.


Argentina’s monthly inflation rate accelerated to 6% in January, from 5.1% in the previous month, exerting slight pressure on the ARS/USD forex pair.


South Korea’s unemployment rate unexpectedly fell to 2.9% in January, versus 3.1% in December. Despite this, the KRW/USD pair declined in forex trading this morning.

 

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

What happened: The beverages giant reported revenues that topped market expectations.

However, unit volumes declined in the quarter due to price increases by the company.

How were the results: The Atlanta, Georgia-based company reported single-digit growth in sales for the three months ending in December.

  • Sales grew 7% year-over-year to $10.125 billion, beating the consensus estimates of $10.02 billion.
  • Adjusted earnings came in at 45 cents per share, in-line with Wal Street expectations.

Why it matters: Coca-Cola’s revenues were propelled by increased prices during the quarter. The company said it plans to raise soda prices further in 2023, in contrast to its major rival PepsiCo, which announced plans to halt inflation-related price increases.

Coca-Cola’s average selling price climbed 11% in the full year ended December 31, while PepsiCo’s average selling price was up 14%.

Due to the price hikes, Coca-Cola’s unit volumes fell 1% in the quarter, amid a decline in demand in Europe, although operating margins expanded by 280 basis points to 20.5%.

Cash flows generated from operating activities contracted by 13% year-over-year to $11 billion.

Management guided to organic revenue growth of 7%-8% for fiscal 2023. They also projected comparable currency neutral EPS growth of 7%-9%. The company raised its comparable EPS growth forecast from 3% to 4%-5% and projected free cash flows of around $9.5 billion for the year.

How shares responded: Coca-Cola’s shares fell 1.7% to close at $59.59 on Tuesday, following the release of quarterly results. The stock has declined around 8% over the past six months.

What to watch: Investors will keep an eye on Coca-Cola’s price hikes in the coming period, which could significantly impact the company’s overall results in the coming period.

The markets today

UK stocks will be in focus today ahead of inflation data

Context: UK’s FTSE 100 climbed to a record high on Tuesday as investors digested recent economic data.

Details: British equities extended gains for a second session in a row, with the country’s FTSE 100 settling at a new record high on Tuesday.

Investors assessed economic data, which showed the unemployment rate in the country coming in unchanged at 3.7% for the three months to December, while pay excluding bonuses rose by 6.7%. Labour productivity in the UK rose 0.3% on quarter, while the number of people in work rose by 74,000 in the three months to December, after an increase of 27,000 in the prior month.

Shares of Coca-Cola HBC gained over 5% after the company posted better-than-expected profits. Vodafone’s stock also moved higher after Liberty Global said it had acquired a stake in the telecom group.

Travel and leisure stocks moved higher after TUI said it was seeing a recovery in travel. easyJet’s shares added more than 3% after Deutsche Bank analysts upgraded the stock to Buy.

London’s blue-chip FTSE 100 gained 0.08% to close at 7,953.85 on Tuesday, while the domestically focussed FTSE 250 index fell 0.53% to 20,018.23.

What are expectations: Traders await the release of inflation data from the UK today. Annual inflation rate in the UK, which fell to 10.5% in December, is expected to decline further to 10.3% in January. Analysts expect the Retail Price Index to rise 13% year-over-year in January, down from 13.4% in December. The headline rate of input prices, which rose by 16.5% from a year ago in December, is expected to increase by 13.8% in January.

Other Markets: US trading indices closed mixed on Tuesday, with the Dow Jones index and S&P 500 down by 0.46% and 0.03%, respectively, and the Nasdaq 100 up by 0.71%.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0723 and 1.0728 Negative
USD/CAD – 1.3355 and 1.3363 Positive
Copper – 4.0670 and 4.0742 Positive
WTI Crude Oil  – 78.66 and 78.79 Positive
Dow Jones – 34047.42 and 34141.22 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0725, -0.11%) Dow ($34,019, -0.30%) Brent ($85.22, -0.4%)
GBP/USD (1.2153, -0.17%) S&P500 ($4,129, -0.39%) WTI ($78.71, -0.4%)
USD/JPY (132.95, -0.13%) Nasdaq ($12,556, -0.59%) Gold ($1,862, -0.2%)

What else to watch today

Saudi Arabia’s wholesale prices change and consumer price index, South Africa’s inflation rate and retail trade, Spain’s consumer price index, Turkey’s government budget balance, Eurozone’s industrial production and balance of trade, US MBA mortgage applications, retail sales, NY Empire State manufacturing index, industrial production, business inventories, NAHB housing market index, gasoline stocks, crude oil stocks and distillate stocks, India’s balance of trade, as well as Canada’s housing starts, car registrations, manufacturing sales and wholesale sales.


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