The Biggest Threat to The Coca-Cola Company (KO) Earnings

Page 1 of 2

The Coca-Cola Company (NYSE:KO) is scheduled to release its quarterly earnings report tomorrow, and the soft-drink giant is a prime example of how the slowdown in the global economy has affected prospects for multinational companies that have relied on going beyond their home countries to find profit opportunities. Even though most of the stocks in the Dow Jones Industrials have a multinational component, The Coca-Cola Company (NYSE:KO) in particular has benefited from the worldwide reach of its top-ranked brand: Well more than half its revenue and nearly three-quarters of its profit come from outside North America.

The Coca-Cola Company (NYSE:KO)Lately, though, The Coca-Cola Company (NYSE:KO)’s growth in its international markets has slowed as Europe has suffered economic headwinds and growth rates in emerging-market areas like Latin America and the Pacific region have slowed. Are the good times over for the company? Let’s take an early look at what’s been happening with The Coca-Cola Company (NYSE:KO) over the past quarter and what we’re likely to see in its quarterly report.

Stats on Coca-Cola

Analyst EPS Estimate $0.63
Change From Year-Ago EPS 3.3%
Revenue Estimate $12.97 billion
Change From Year-Ago Revenue (0.9%)
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

Will Coca-Cola earnings stay fizzy or fall flat this quarter?
In recent months, analysts have been a little bit pessimistic about The Coca-Cola Company (NYSE:KO)’s earnings prospects, cutting $0.02 per share off their June-quarter estimates and a penny per share from their full-year 2013 and 2014 consensus earnings figures. The stock has seen similarly unenthusiastic performance, with shares up less than 1% since early April.

Lately, Coca-Cola has been having a serious growth problem. In its previous quarter, the company saw revenue decline by about 1%, and although it managed to beat earnings and sales expectations, earnings per share didn’t provide any year-over-year growth, even when adjusting for unusual items. International volume growth of 5% sounds reasonably strong, especially given larger gains of 8% to 18% in areas like Thailand, India, and Russia. But China was weak, and with the continued pressure on the Chinese economy, those difficulties might persist for quite a while.

In order to bolster growth, The Coca-Cola Company (NYSE:KO) has made a number of innovative moves. Its Freestyle fountain machine has started to gain in popularity, as restaurant chains including Burger King Worldwide Inc (NYSE:BKW) have signed on to put machines in their stores. Burger King Worldwide Inc (NYSE:BKW) will implement the mix-and-match soda machines in its company-owned locations, likely hoping to benefit from their novelty factor, as many of Burger King’s restaurants give customers direct access to fountain drinks. Coca-Cola could also use the machines as an environmentally friendly rebuttal to SodaStream International Ltd (NASDAQ:SODA) and its attacks on the drink giant, as Freestyle doesn’t require bottling and therefore has the same advantages as SodaStream International Ltd (NASDAQ:SODA)’s home carbonators. SodaStream’s campaigns have been fairly effective in highlighting the value of its own product, although it’s a stretch to blame Coca-Cola’s struggles on the carbonator-maker. Meanwhile, in its efforts to help make its product more available even in areas without electricity, Coca-Cola started an initiative to provide small solar-power kits to kiosk owners in Kenya.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!