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The Coca-Cola Company (KO - Free Report) reported better-than-expected results for the fourth quarter of 2016. Meanwhile, though the cola giant’s earnings and revenues beat the Zacks Consensus Estimate, both have declined year over year due to macroeconomic challenges in many international markets and currency headwinds. Shares dropped 0.3% in pre-market trading.
International weakness and the stronger U.S. dollar have impacted quarterly results for the company, which generates about half its sales abroad. However, higher prices have helped the company partially offset the decline.
This Atlanta-based company issued guidance for 2017.
Earnings Beat
Fourth-quarter 2016 adjusted earnings of the company were 37 cents per share, which beat the Zacks Consensus Estimate of 36 cents by 2.8%.
Earnings declined 2.6% year over year due to currency headwinds. Excluding the 11% negative Fx impact and 51% from other items impacting comparability, earnings declined 55%.
Full-year earnings (non-GAAP) came in at $1.91, down 4.5%. Excluding the 9% negative Fx impact and 6% from other items hurting comparability, earnings declined 10%.
Sales Beat; Organic Revenues Improve
Net revenue declined 6% year over year to $9.40 billion due to currency headwinds and the negative impact of structural items. Currency headwinds hurt sales by 2%.
Acquisitions/divestitures and structural items had a 10% impact on revenues.
After adjusting for the negative Fx impact and acquisitions/divestitures, organic revenues rose 6%, higher than 3% growth in the previous quarter, driven by 6% price/mix growth.
Revenues surpassed the Zacks Consensus Estimate of $9.10 billion.
Margins
Adjusted consolidated gross margins contracted 10 basis points (bps) year over year to 59.4% as positive pricing and productivity gains were offset by currency headwinds.
Adjusted selling, general and administrative (SG&A) expenses declined 8% on a currency-neutral basis to $3.95 billion.
Adjusted operating income, on a constant currency basis, was $1.98 billion, up 7% year over year. Adjusted operating margin was 21.1%, up 110 basis points from 20% a year ago.
Profit-before-tax (PBT) declined 5% to $2.05 billion. Currency translations hurt PBT by 11. Structural changes had a negative impact of 7% on PBT. Excluding currency headwinds and structural changes, PBT rose 14%.
The structural changes mainly include the impact of bottler re-franchising efforts and the brand transfer agreement with Monster which closed in 2015.
Volume and Pricing
Coca-Cola witnessed 1% unit case volume growth in the quarter. Low single-digit unit case volume growth in developed markets was offset by continued macroeconomic challenges in several Latin American markets.
Unit case volume grew 1% in the quarter in North America that includes 1% growth in sparkling beverages.
Sparkling beverage unit case volume was down 2% while still beverage unit case volume grew 2%.
Price/mix increased 6% compared with a 1% rise in the previous quarter.
2017 Outlook
Organic revenues are expected to rise 3%. Acquisitions/divestitures (mainly the bottler re-franchising efforts) are expected to hurt revenues by 18–19%, while Fx is likely to have a negative impact of 1–2% on revenues.
Excluding currency headwinds and structural changes, PBT is expected to increase 7–8%.
Foreign exchange is expected to hurt PBT by 3–4%. Structural changes are likely to have a 5–6% negative impact on PBT.
The company expects adjusted EPS to be down 1% to 4% from the prior year’s comparable EPS of $1.91.
The company expects to buy back shares worth $2.0 billion in 2017. Adjusted effective tax rate is likely to be 24%.
Pepsico, Inc. (PEP - Free Report) is set to report fourth-quarter 2016 results on Feb 15, before the market opens.
Dr Pepper Snapple Group, Inc. is set to report its quarterly results on Feb 14, before the market opens.
Monster Beverage Corp. (MNST - Free Report) is expected to report its quarterly results on Feb 23.
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Coca-Cola (KO) Tops Q4 Earnings, Revenues; Issues '17 View
The Coca-Cola Company (KO - Free Report) reported better-than-expected results for the fourth quarter of 2016. Meanwhile, though the cola giant’s earnings and revenues beat the Zacks Consensus Estimate, both have declined year over year due to macroeconomic challenges in many international markets and currency headwinds. Shares dropped 0.3% in pre-market trading.
International weakness and the stronger U.S. dollar have impacted quarterly results for the company, which generates about half its sales abroad. However, higher prices have helped the company partially offset the decline.
This Atlanta-based company issued guidance for 2017.
Earnings Beat
Fourth-quarter 2016 adjusted earnings of the company were 37 cents per share, which beat the Zacks Consensus Estimate of 36 cents by 2.8%.
Earnings declined 2.6% year over year due to currency headwinds. Excluding the 11% negative Fx impact and 51% from other items impacting comparability, earnings declined 55%.
Full-year earnings (non-GAAP) came in at $1.91, down 4.5%. Excluding the 9% negative Fx impact and 6% from other items hurting comparability, earnings declined 10%.
Sales Beat; Organic Revenues Improve
Net revenue declined 6% year over year to $9.40 billion due to currency headwinds and the negative impact of structural items. Currency headwinds hurt sales by 2%.
Acquisitions/divestitures and structural items had a 10% impact on revenues.
After adjusting for the negative Fx impact and acquisitions/divestitures, organic revenues rose 6%, higher than 3% growth in the previous quarter, driven by 6% price/mix growth.
Revenues surpassed the Zacks Consensus Estimate of $9.10 billion.
Margins
Adjusted consolidated gross margins contracted 10 basis points (bps) year over year to 59.4% as positive pricing and productivity gains were offset by currency headwinds.
Adjusted selling, general and administrative (SG&A) expenses declined 8% on a currency-neutral basis to $3.95 billion.
Adjusted operating income, on a constant currency basis, was $1.98 billion, up 7% year over year. Adjusted operating margin was 21.1%, up 110 basis points from 20% a year ago.
Profit-before-tax (PBT) declined 5% to $2.05 billion. Currency translations hurt PBT by 11. Structural changes had a negative impact of 7% on PBT. Excluding currency headwinds and structural changes, PBT rose 14%.
The structural changes mainly include the impact of bottler re-franchising efforts and the brand transfer agreement with Monster which closed in 2015.
Volume and Pricing
Coca-Cola witnessed 1% unit case volume growth in the quarter. Low single-digit unit case volume growth in developed markets was offset by continued macroeconomic challenges in several Latin American markets.
Unit case volume grew 1% in the quarter in North America that includes 1% growth in sparkling beverages.
Sparkling beverage unit case volume was down 2% while still beverage unit case volume grew 2%.
Price/mix increased 6% compared with a 1% rise in the previous quarter.
2017 Outlook
Organic revenues are expected to rise 3%. Acquisitions/divestitures (mainly the bottler re-franchising efforts) are expected to hurt revenues by 18–19%, while Fx is likely to have a negative impact of 1–2% on revenues.
Excluding currency headwinds and structural changes, PBT is expected to increase 7–8%.
Foreign exchange is expected to hurt PBT by 3–4%. Structural changes are likely to have a 5–6% negative impact on PBT.
The company expects adjusted EPS to be down 1% to 4% from the prior year’s comparable EPS of $1.91.
The company expects to buy back shares worth $2.0 billion in 2017. Adjusted effective tax rate is likely to be 24%.
Zacks Rank
Currently, Coca-Cola has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coca-Cola Company (The) Price, Consensus and EPS Surprise
Coca-Cola Company (The) Price, Consensus and EPS Surprise | Coca-Cola Company (The) Quote
Upcoming Peer Releases
Pepsico, Inc. (PEP - Free Report) is set to report fourth-quarter 2016 results on Feb 15, before the market opens.
Dr Pepper Snapple Group, Inc. is set to report its quarterly results on Feb 14, before the market opens.
Monster Beverage Corp. (MNST - Free Report) is expected to report its quarterly results on Feb 23.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>