KO
Coca Cola CO
NYSE
8-K: Coca-Cola Reports Mixed Q3 Results, Updates Full-Year Guidance Amidst Currency Headwinds
Sentiment:
Quarterly Report
23 October 2024 7:00 AM
Coca-Cola's third-quarter results show a decline in net revenues but growth in organic revenues, alongside updated full-year guidance reflecting currency headwinds and strategic adjustments.
Worse than expected
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.
Summary
- Coca-Cola's net revenues decreased by 1% to $11.9 billion in the third quarter of 2024, while organic revenues grew by 9%.
- The company's operating income declined by 23%, but comparable currency neutral operating income grew by 14%.
- Operating margin was 21.2%, down from 27.4% in the prior year, while comparable operating margin was 30.7%, up from 29.7%.
- Earnings per share (EPS) decreased by 7% to $0.66, but comparable EPS grew by 5% to $0.77.
- Global unit case volume declined by 1%, with growth in some regions offset by declines in others.
- The company experienced a $6.0 billion payment to the IRS related to ongoing tax litigation, impacting cash flow.
- Coca-Cola is leveraging digital technologies, including AI, to enhance marketing and product development.
- The company expects full-year 2024 organic revenue growth of approximately 10% and comparable EPS growth of 5% to 6%.
Sentiment
Score: 5
Explanation: The sentiment is neutral to slightly negative due to mixed results. While organic revenue and comparable metrics show growth, the decline in net revenue, operating income, and EPS, along with significant currency headwinds and a large tax payment, temper the positive aspects.
Positives
- Organic revenue grew by 9%, indicating strong underlying business performance.
- Comparable currency neutral operating income increased by 14%, showing operational efficiency.
- The company gained value share in the nonalcoholic ready-to-drink beverage market.
- Coca-Cola is actively using digital technologies and AI to drive innovation and efficiency.
- The company's water, sports, and tea offerings have added nearly $9 billion in incremental brand value since 2020.
- Coca-Cola Zero Sugar grew 11%, demonstrating strong consumer demand.
Negatives
- Net revenues declined by 1%, indicating some challenges in overall sales.
- Operating income declined by 23%, impacted by a $919 million charge related to the fairlife acquisition and currency headwinds.
- EPS declined by 7% to $0.66, reflecting the impact of various charges and currency headwinds.
- Global unit case volume declined by 1%, indicating a decrease in overall product sales.
- Cash flow from operations and free cash flow decreased due to a $6.0 billion payment to the IRS.
- The company lost value share in total NARTD beverages in Latin America.
- Bottling Investments operating income declined 68%.
Risks
- The company faces significant currency headwinds, which are expected to impact full-year 2024 and 2025 results.
- Ongoing tax litigation with the IRS could have a material impact on the company's financial results.
- The company is exposed to fluctuations in foreign currency exchange rates.
- The company is facing increased interest expense due to debt issued to pay the IRS tax litigation deposit.
- The company is exposed to risks related to economic and geopolitical conditions.
- The company is exposed to risks related to supply chain disruptions and increased input costs.
- The company is exposed to risks related to evolving consumer preferences and health concerns.
Future Outlook
The company expects full-year 2024 organic revenue growth of approximately 10% and comparable EPS growth of 5% to 6%. The company anticipates currency headwinds to impact both 2024 and 2025 results. Fourth quarter 2024 comparable net revenues are expected to include an approximate 4% currency headwind and a 4% to 5% headwind from acquisitions, divestitures and structural changes. Fourth quarter 2024 comparable EPS is expected to include an approximate 10% currency headwind and a 3% to 4% headwind from acquisitions, divestitures and structural changes. Full year 2025 comparable net revenues are expected to include a low single-digit currency headwind and comparable EPS is expected to include a mid single-digit currency headwind.
Management Comments
- James Quincey, Chairman and CEO, stated that the business continues to demonstrate resilience in a dynamic external environment.
- He also noted that the company is encouraged by its year-to-date performance and its systems ability to manage near-term challenges while remaining focused on long-term growth opportunities.
Industry Context
The results reflect a mixed performance in the beverage industry, with challenges from currency fluctuations and inflationary pressures. The company's focus on digital transformation and innovation aligns with broader industry trends towards leveraging technology for growth and efficiency. The company's focus on a total beverage portfolio and expansion into new categories is also a key trend in the industry.
Comparison to Industry Standards
- PepsiCo, a major competitor, reported a 6.7% increase in organic revenue in their most recent quarter, which is lower than Coca-Cola's 9% growth, but PepsiCo's net revenue growth was higher at 8.8% compared to Coca-Cola's 1% decline.
- Keurig Dr Pepper reported a 5.9% increase in net sales in their most recent quarter, indicating a similar trend of growth in the beverage industry, but their growth was lower than Coca-Cola's organic revenue growth.
- Coca-Cola's comparable operating margin of 30.7% is competitive with industry standards, but the reported operating margin of 21.2% is lower due to specific charges.
- The company's focus on digital transformation and AI is in line with industry trends, with other major players also investing in these areas to improve efficiency and customer engagement.
Stakeholder Impact
- Shareholders may be concerned about the decline in net revenue, operating income, and EPS, but encouraged by the organic revenue growth and strategic initiatives.
- Employees may be affected by restructuring initiatives and changes in operational strategies.
- Customers may benefit from the company's focus on innovation and new product development.
- Suppliers may be impacted by changes in the company's supply chain and sourcing practices.
- Creditors may be concerned about the company's cash flow and debt levels.
Next Steps
- The company will continue to focus on its long-term growth strategy.
- The company will continue to leverage digital technologies and AI to drive innovation and efficiency.
- The company will provide full-year 2025 guidance when it reports fourth quarter earnings.
Legal Proceedings
- The company made a $6.0 billion payment to the IRS related to ongoing tax litigation.
Key Dates
- 2020: Acquisition of fairlife, LLC.
- October 23, 2024: Date of the earnings report and conference call.
Keywords
Coca-Cola, Financial Results, Q3 2024, Earnings, Revenue, Operating Income, EPS, Organic Growth, Currency Headwinds, Non-GAAP, Unit Case Volume, AI, Digital Transformation, Tax Litigation
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.
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
1 May 2025 3:38 PM
Quarterly Report
- Net operating revenues decreased by 2% due to foreign currency fluctuations and strategic divestitures.
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.