Coca-Cola said on Thursday that fourth-quarter earnings were in line with expectations, but that was not enough to mitigate investor concerns over the weaker-than-expected outlook for 2019 earnings.
"EPS growth is not what we aim for," he said.
The global beverage giant is fighting the headwind of the currency, which reduced its profit by 1
Here's what Coke said compared to what Wall Street expected, based on an analyst survey by Refinitiv:
- Earnings per share: 43 cents vs. 43 cents expected
- Sales: $ 7.06 bn USD Expects $ 7.04 Billion
Revenues Declined 6% to $ 7.06 Billion, Still Higher $ 7.04 Billion. The company attributed the decline in sales to the impact of currencies and the reorganization of its bottling activities, a project that is almost completed.
Sales of sparkling soft drinks declined by 1 percent in the fourth quarter, despite the popular Coca-Cola zero-sugar beverages, again posting double-digit growth.
The volume of the units was unchanged compared to the previous year. Quincey attributed the flat volume to the focus on value over volume in some markets. Unit sales in North America declined 1 percent as the impact of midsummer prices finally hit consumers, he said in the conference call.
"So it's a bit milder," he said. "But then it started to grow, and we started well with the year."
In addition, economic conditions in certain emerging markets, such as Central America, offset growth in India and Central and Eastern Europe. In Argentina, for example, the volume of unit cases declined in the double-digit range when the country entered a recession in the second half of 2019.
The Soda giant posted net income of $ 870 million or 20 cents per share for the fourth quarter, down from $ 2.75 billion, or 65 cents a share, the previous year. Coke said that freight costs had a negative impact on earnings for the quarter. Deputy CFO John Murphy, who will take over the retirement of CFO Kathy Waller in March, told analysts that the company does not expect a rise in freight rates in the US over the previous year (2018).
Excluding positions, Coke scored 43 cents a share for the quarter, according to the consensus estimates of Refinitiv.
For fiscal year 2019, Coke forecasts organic sales growth of 4 percent.
"Our forecast for 2019 is cautious of the multiple declines in global economic growth prospects for 2018 and our own experience in some of the emerging and developing markets," said Quincey.
Murphy also said that the company expects higher interest expense, based on the timing of the Fed's rate hike. In the first half of 2019, there was a stronger currency wind than in the last six months.
With the decline in global soda consumption, the beverage giant expanded beyond its core non-alcoholic beverage business. Last year, it acquired the British chain Costa Coffee for $ 5.1 billion, one of its six acquisitions in 2018. Quincey told analysts at the quarterly conference call that they had closed the Costa deal on January 3, a few months earlier than planned.
After the expiration of the Brexit deadline, which could be approaching without a clear outcome, Quincey said that the company is presenting contingency plans for Costa and the other UK companies.
"It's probably just a short-term disruptive effect if it actually ends up in this scenario, and we'll succeed," Quincey said.