Earnings: Coca-Cola surprises again with not-so-sweet Q1 financial results

Investors and analysts alike weren’t sure what to expect of today’s earnings season report from The Coca-Cola Company (KO).

On the one hand, inflation has been driving sales down for brands across the board. On the other hand, Coca-Cola is known for defying pessimistic earnings predictions by beating estimates time and again.

And so, when the beverage behemoth reported its Q1 2024 financial results before US markets opened today on April 30^th, most were eager to learn if the company had seen a ‘lipstick effect’ in tough economic times, or depressed sales due to persistent headwinds like inflation.

The results

Unfortunately, the pessimists proved to be right on this one, with all but EPS and cash flow showing disappointing numbers.

Most unexpected of all was the decline in operating income, which fell year-on-year a sizable 36%.

According to the company’s press release, this was “driven by items impacting comparability, including a charge of $765 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with our acquisition of fairlife and a non-cash impairment charge of $760 million related to the BODYARMOR trademark, as well as currency headwinds.”

The company reported concentrate sales declined 2%, while unit case sales increased a marginal 1%.

According to the company, “concentrate sales were 3 points behind unit case volume, largely due to the timing of concentrate shipments and the impact of one less day in the quarter.”

Coca-Cola’s operating margin for Q1 was also alarming, at almost half of what it was the previous year (18.9% instead of 2023’s 30.7%)

Revenues and cash flow

Meanwhile, revenues for the quarter grew 3% to $11.3 billion, and organic revenues (non-GAAP) grew 11%.

Meanwhile, cash flow from operations was $528 million, an increase of $368 million versus the prior year

Earnings per share

In terms of diluted earnings per share, Coca-Cola EPS Grew 3% to $0.74; Comparable EPS (Non-GAAP) Grew 7% to $0.72.

Expectations ahead of earnings

The Coca-Cola stock price has done reasonably well in 2024 so far, up 3.7% this year to date as of the time of this article’s writing.

It’s also worth noting that, as we said before, Coca-Cola is known for beating estimates.

Analysts were expecting a marginal increase in EPS, up to $0.69 per share, compared with the $0.68 EPS from Q1 of 2023.

Sales were also largely forecast to remain flat, increasing just 0.44% year-on-year.

Previous earnings

Coca-Cola reported that net revenues grew 7% to $10.8 billion in Q4, while organic revenues (non-GAAP) grew 12%, driven by 9% growth in price/mix and 3% growth in concentrate sales.

However, the quarter’s EPS was disappointing, dropping 2% to be just $0.46 per share.

The operating margin figures were also disappointing, increasing only 0.5% year-on-year for Q4.

Against these former results, today’s earnings were sweeter in terms of EPS, but surprisingly sour in other areas.

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