Coca-Cola Earnings and Sales Beat Estimates as Beverage Giant Hikes Prices

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Coca-Cola posted adjusted earnings of 68 cents a share.


Photograph by Leighann Renee

Coca-Cola
beat first-quarter revenue and earnings estimates Monday following price increases.

Coca-Cola (ticker: KO) posted first-quarter adjusted earnings of 68 cents a share on sales of $11 billion, up 5% year-over-year. Analysts surveyed by FactSet were expecting earnings of 65 cents a share on revenue of $10.8 billion. This time last year, the owner of Diet Coke and Minute Maid reported earnings of 64 cents a share on sales of $10.49 billion.

“The Coca-Cola Company today reported first quarter 2023 results, demonstrating resilience in the marketplace despite an operating environment that remains dynamic,” the company said in its earnings report.

Coca-Cola also reiterated its outlook for the full year. It expects comparable earnings to grow between 4% and 5% in 2023, with organic revenue growing between 7% and 8%.

Shares of Coca-Cola gained 0.3% Monday to $64.26. The stock has risen 1% this year.

“Despite better-than-expected Q1 results, KO reiterated its 2023 guidance, which we believe is prudent considering an uncertain macro environment,” wrote
Citi
analyst Filippo Falorni in a research note Monday. Falorni has a Buy rating on the stock with a $71 price target.

Cocal-Cola believes inflation will continue to take a toll on its financial performance over the course of the fiscal year. Commodity price inflation will weigh on comparable cost of goods sold, or the direct costs of producing the goods sold. Coca-Cola largely has been able to offset higher production costs by increasing prices. And indeed, average selling prices increased 11% during the quarter.

Consumer staple stocks such as Coca-Cola have been weathering the macroeconomic uncertainty relatively well as shoppers have been willing to pay higher prices for their favorite brands. The question now is what the breaking point is for consumers, and just how many more price increases they can take. As macroeconomic conditions slow, consumers are becoming more budget-conscious.

Unit case volumes rose 3% in the quarter, notching gains in Latin America and Asia Pacific. But case volumes in Europe, the Middle East, and Africa were down 3%, while North American volumes were unchanged.

Truist Securities analyst Bill Chappell remains upbeat on the stock, rating Coca-Cola shares at Buy with a $75 price target. He wrote in a research note Monday that he sees “the potential for upside in 2H23 as the company should benefit from lower costs, FX [foreign exchange], more productivity, and potentially more pricing.”

PepsiCo
(PEP), a rival beverage maker with brands such as Pepsi and Mountain Dew, is scheduled to report first-quarter earnings before the market opens Tuesday. Shares of
PepsiCo
gained 0.4% to $186.16 on Monday. It traded as high as $186.57, which would be the highest intraday level since Dec. 13, 2022, when it hit $186.84, according to Dow Jones Market Data.

Write to Angela Palumbo at [email protected]

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