KO
Coca Cola CO
NYSE
8-K: Coca-Cola Reports Mixed Q1 Results: Revenue Growth Offset by Significant Charges
Sentiment:
Quarterly Report
30 April 2024 6:58 AM
Coca-Cola's first quarter saw revenue growth, but operating income was significantly impacted by charges related to acquisitions and trademark impairments.
Worse than expected
The company's reported operating income declined by 36%, significantly worse than expected due to substantial charges related to the fairlife acquisition and the BODYARMOR trademark impairment.
Summary
- Coca-Cola's net revenues grew by 3% to $11.3 billion in the first quarter of 2024, while organic revenues increased by 11%.
- The company's operating income declined by 36%, primarily due to a $765 million charge related to the fairlife acquisition and a $760 million non-cash impairment charge for the BODYARMOR trademark.
- Comparable currency neutral operating income grew by 13%, and comparable operating margin was 32.4%, compared to 31.8% in the prior year.
- Earnings per share (EPS) grew by 3% to $0.74, while comparable EPS grew by 7% to $0.72.
- Global unit case volume increased by 1%, with growth in developing and emerging markets offsetting flat performance in developed markets.
- The company gained value share in total nonalcoholic ready-to-drink beverages.
- Cash flow from operations was $528 million, an increase of $368 million year-over-year, and free cash flow was $158 million, up $274 million year-over-year.
Sentiment
Score: 5
Explanation: The sentiment is neutral to slightly negative due to strong revenue growth being offset by significant charges and currency headwinds. While the underlying business shows positive trends, the reported results are impacted by one-off items.
Positives
- Organic revenue grew by 11%, indicating strong underlying sales performance.
- Comparable currency neutral operating income increased by 13%, showing operational improvements when excluding one-off items and currency fluctuations.
- The company gained value share in the nonalcoholic ready-to-drink beverage market.
- Cash flow from operations and free cash flow both increased significantly year-over-year.
- The company is successfully leveraging digital tools to engage consumers and customers, with an 8% increase in connected customers.
- The company is innovating with new products like Coca-Cola Happy Tears Zero Sugar and Foodmarks by Coca-Cola.
Negatives
- Reported operating income declined by 36%, significantly impacted by a $765 million charge related to the fairlife acquisition and a $760 million non-cash impairment charge for the BODYARMOR trademark.
- The company experienced a 7-point currency headwind impacting EPS performance.
- Concentrate sales were 3 points behind unit case volume due to timing of shipments and one less day in the quarter.
- The company lost value share in total NARTD beverages in Latin America.
- Unit case volume declined by 7% in Bottling Investments due to refranchising activities.
Risks
- The company faces significant currency headwinds, which are expected to continue impacting results.
- The company is exposed to risks related to acquisitions and divestitures, as evidenced by the fairlife charge and refranchising impacts.
- The company is subject to potential impairment charges, as seen with the BODYARMOR trademark.
- The company is exposed to risks related to economic and geopolitical conditions, including conflicts in Russia, Ukraine and the Middle East.
- The company faces risks related to supply chain disruptions, commodity costs, and labor issues.
- The company is subject to ongoing tax litigation with the U.S. Internal Revenue Service.
Future Outlook
The company expects to deliver organic revenue (non-GAAP) growth of 8% to 9% for the full year 2024. Comparable EPS (non-GAAP) growth is expected to be 4% to 5%, including a 7% to 8% currency headwind. The company expects to generate free cash flow (non-GAAP) of approximately $9.2 billion. Second quarter 2024 comparable net revenues (non-GAAP) are expected to include an approximate 6% currency headwind and a 5% to 6% headwind from acquisitions, divestitures and structural changes. Second quarter 2024 comparable EPS (non-GAAP) is expected to include an approximate 8% to 9% currency headwind and an approximate 2% headwind from acquisitions, divestitures and structural changes.
Management Comments
- We're encouraged by our start to 2024, delivering another quarter of volume, topline and earnings growth amidst a dynamic backdrop, said James Quincey, Chairman and CEO of The Coca-Cola Company.
- We believe our global system is primed for sustained success, thanks to the right strategies, clear alignment, a powerful portfolio and strong execution.
Industry Context
The results reflect a mixed performance in the beverage industry, with strong revenue growth offset by significant charges. The company's focus on digital engagement and new product launches aligns with broader industry trends. The company's performance in different regions highlights the varying market dynamics and consumer preferences.
Comparison to Industry Standards
- PepsiCo, a major competitor, reported a 2.3% increase in organic revenue in their most recent quarter, which is lower than Coca-Cola's 11% growth, but PepsiCo did not have the same level of impairment charges.
- Other beverage companies like Keurig Dr Pepper have also reported revenue growth, but their operating margins and profitability metrics vary based on their specific product portfolios and market focus.
- Coca-Cola's focus on digital engagement and personalized experiences is in line with industry trends, as companies are increasingly leveraging technology to connect with consumers.
- The company's performance in emerging markets, particularly in Brazil, the Philippines, and Nigeria, is a positive sign, as these markets are key growth drivers for the beverage industry.
Stakeholder Impact
- Shareholders may be concerned about the significant decline in operating income and the impact of charges on profitability.
- Employees may be affected by restructuring initiatives and changes in the company's operations.
- Customers may benefit from new product launches and digital engagement initiatives.
- Bottling partners may be impacted by refranchising activities and changes in the company's distribution strategy.
- Suppliers may be affected by changes in the company's sourcing practices and supply chain management.
Next Steps
- The company will continue to focus on driving organic revenue growth and managing costs.
- The company will continue to leverage digital tools to engage consumers and customers.
- The company will continue to innovate with new products and marketing initiatives.
- The company will host a conference call with investors and analysts to discuss the results.
Key Dates
- April 30, 2024: Date of the earnings report and press release.
Keywords
Coca-Cola, beverages, revenue, operating income, EPS, unit case volume, organic revenue, non-GAAP, currency headwinds, impairment, fairlife, BODYARMOR, digital, marketing, cash flow
KO
Coca Cola CO
NYSE
Sector: TBD
Filings with Classifications
Worse than expected
26 June 2025 11:33 AM
Current Report
- Operating income decreased by 12% in 2024, indicating a decline in core profitability.
- Net cash provided by operating activities significantly decreased by 41% due to the large IRS tax litigation payment, impacting liquidity.
- The company recorded substantial 'Other Operating Charges' including a $760 million impairment for the BodyArmor trademark and a $3,109 million remeasurement of the fairlife contingent consideration liability, indicating significant one-time or non-recurring negative impacts on profitability.
Delay expected
26 June 2025 11:33 AM
Current Report
- Certain initiatives included in the company's productivity and reinvestment program, primarily designed to further simplify and standardize the organization, have been delayed and will now be completed during 2025.
Worse than expected
1 May 2025 3:38 PM
Quarterly Report
- Net operating revenues decreased by 2% due to foreign currency fluctuations and strategic divestitures.
Delay expected
1 May 2025 3:38 PM
Quarterly Report
- Certain initiatives included in the productivity and reinvestment program, which are primarily designed to further simplify and standardize our organization, have been delayed and will be completed during 2025.
Worse than expected
29 April 2025 6:58 AM
Quarterly Report
- Net revenues declined 2% due to currency headwinds and refranchising, indicating worse performance than expected.
- Free cash flow was negative $5.5 billion due to a large contingent consideration payment, indicating worse performance than expected.
Worse than expected
20 February 2025 3:17 PM
Annual Results
- Operating income decreased by 12% due to higher commodity costs, selling, general and administrative expenses, other operating charges, the impact of refranchising, and unfavorable foreign currency exchange rate impact.
Worse than expected
24 October 2024 11:55 AM
Quarterly Report
- The company's operating income decreased by 23% in Q3 2024 compared to Q3 2023.
- The company's net operating revenues decreased by 1% in Q3 2024 compared to Q3 2023.
- The company recorded a $760 million impairment charge related to the BodyArmor trademark.
Worse than expected
23 October 2024 7:00 AM
Quarterly Report
- The company's net revenue declined by 1%, and operating income decreased by 23%, indicating worse than expected results.
- EPS declined by 7%, which is worse than expected.
- The company's cash flow from operations and free cash flow decreased due to a $6.0 billion payment to the IRS, which is worse than expected.
Capital raise
15 August 2024 4:10 PM
Debt Offering Announcement
- The Coca-Cola Company completed a public offering of 1 billion euros in aggregate principal amount of euro-denominated notes.
- The offering includes 500 million euros of 3.375% notes due in 2037 and 500 million euros of 3.750% notes due in 2053.
Capital raise
14 August 2024 4:14 PM
Debt Offering Announcement
- The Coca-Cola Company completed a public offering of $3 billion in senior notes.
- The offering included $750 million of 4.650% notes due in 2034, $1.5 billion of 5.200% notes due in 2055, and $750 million of 5.400% notes due in 2064.
- The company intends to use the net proceeds for general corporate purposes.
Capital raise
9 August 2024 4:24 PM
Debt Offering Announcement
- Coca-Cola is raising $3 billion through a debt offering.
- The offering is split into a US dollar-denominated offering and a euro-denominated offering.
- The US dollar offering includes $750 million of 4.650% notes due 2034, $1.5 billion of 5.200% notes due 2055, and $750 million of 5.400% notes due 2064.
- The euro offering includes 500 million of 3.375% notes due 2037 and 500 million of 3.750% notes due 2053.
Worse than expected
29 July 2024 3:54 PM
Quarterly Report
- Operating income decreased by 17% for the first six months of 2024, indicating a worse performance compared to the same period last year.
- The company recorded significant other operating charges of $2.943 billion for the first six months of 2024, negatively impacting profitability.
- The potential tax liability of $16 billion due to the ongoing dispute with the IRS is a significant financial risk.
Better than expected
23 July 2024 6:58 AM
Quarterly Report
- The company's organic revenue growth of 15% exceeded expectations.
- The company raised its full-year guidance for organic revenue growth to 9-10% and comparable EPS growth to 5-6%.
Capital raise
14 May 2024 4:08 PM
Debt Offering Announcement
- The Coca-Cola Company completed a public offering of €1 billion in Euro-denominated notes.
- The offering was split into two tranches: €500 million of 3.125% notes due in 2032 and €500 million of 3.500% notes due in 2044.
Capital raise
13 May 2024 4:13 PM
Debt Offering Announcement
- Coca-Cola completed a public offering of $3 billion in aggregate principal amount of U.S. dollar-denominated notes.
- The offering included three tranches with different maturities and interest rates.
- The proceeds will be used for general corporate purposes and potentially for tax litigation payments.
Capital raise
8 May 2024 5:07 PM
Debt Offering Announcement
- The company is raising $3 billion through the issuance of US dollar-denominated notes.
- The company is raising 1 billion through the issuance of Euro-denominated notes.
Worse than expected
2 May 2024 1:52 PM
Quarterly Report
- The company's operating income decreased by 36% due to a $760 million impairment charge related to the BodyArmor trademark and a $765 million charge related to the remeasurement of a contingent consideration liability for fairlife.
Worse than expected
30 April 2024 6:58 AM
Quarterly Report
- The company's reported operating income declined by 36%, significantly worse than expected due to substantial charges related to the fairlife acquisition and the BODYARMOR trademark impairment.
Better than expected
13 February 2024 6:57 AM
Quarterly and Annual Earnings Release
- Organic revenue growth exceeded expectations, demonstrating strong underlying business performance.
- Global unit case volume growth indicates continued demand for Coca-Cola products despite market challenges.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.