Coca Cola reported earnings above Wall Street expectations
Coca-Cola today reported strong third quarter 2022 results as the company continued to build on the momentum from the first half of the year.
Net revenues grew 10% to $11.1 billion, and organic revenues (non-GAAP) grew 16%. Organic revenue (non-GAAP) performance was strong across operating segments and included 12% growth in price/mix and 4% growth in concentrate sales.
Earnings per share grew 14% to $0.65, and comparable EPS (non-GAAP) grew 7% to $0.69 including the impact of an 11-point currency headwind.
For 2022, the company expects EPS growth of 6% to 7%, having previously assumed a range of 5% to 6%. Coca Cola also raised its revenue growth forecast to 14%-15% from a previous ‘conservative’ 12%-13%.
The company showed that shifting the price to consumers resulted in higher revenues and paid off for the company. Buyers were willing to pay more for products.
The carbonated beverage segment including Coca Cola’s flagship beverage saw a 3% increase in sales volume. Consumers also readily reached for sugar-free products. Coca Cola Zero stood out from this with record sales growth, rising 11% quarter-on-quarter.
The sports drinks and tea and coffee division posted growth of 5%, propelled by the Powerade, Bodyarmor brands and the Costa Coffee chain.
Coca cola plans to provide a broader forecast for next year in early 2023. Management expects that inflation will not drastically reduce spending although commodity prices will nevertheless remain volatile. It is likely that exchange rate risk will still have a negative impact on Coca Cola’s earnings and revenues (strong dollar).
Coca Cola’s excellent results are not a big surprise given Pepsico’s very strong report two weeks ago, which opened the earnings season in the US.
Both companies enjoy the so-called ‘wide moat’ described by Buffett, i.e., they have a significant competitive advantage in the industry and can attract capital seeking a ‘safe haven’ during a recession.
However, it would be a mistake to assume that the shares of such giants will remain ‘bulletproof’ forever. For example, it took 14 years for Coca Cola’s stock price to break through the 1998 peaks, although demand for the beverages remained strong.
Coca-Cola shares (KO.US), H4 interval. The company’s shares again lost upward momentum in September and deepened the sell-off.
However, strong financial results indicate strong financial health and growth prospects. Coca Cola has confirmed that it can beat analysts’ expectations in a recessionary environment, and the global reach and power of the brand translates into steadily high demand.
The RSI is pointing to a level of 64 points, and an opening near $60 could make this level rise above 70 points, which historically has heralded a correction so the increases may herald an imminent short-term correction after a 10% retracement of the price from local lows. A signal of a trend reversal could be a crossing of the SMA50 (black). Above the 200-session average (red).