A month has gone by since the last earnings report for Coca-Cola (KO Quick QuoteKO - Free Report) . Shares have lost about 2.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Coke due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Coca-Cola Q2 Earnings Beat Estimates, Revenues Miss

Coca-Cola has delivered second-quarter 2020 results, wherein earnings beat estimates, while sales lagged. Comparable earnings of 42 cents per share beat the Zacks Consensus Estimate of 40 cents but declined 33% from the year-ago period. Currency translations negatively impacted earnings by 5%. Comparable currency-neutral earnings per share fell 28%.

Revenues of $7,150 million missed the Zacks Consensus Estimate of $7,153.5 million and declined 28% year over year. Organic revenues were down 26% from the prior-year quarter. The company’s top line was primarily hurt by a decline in away-from-home channels, which accounts for nearly half of its total revenues. During the quarter, concentrate sales declined 22% and price/mix was down 4%. Moreover, currency headwinds hurt the company’s top line by 3%.

During the quarter, it lost global value share in total non-alcoholic ready-to-drink (NARTD) beverages. The decline was attributed to negative channel mix due to softness in the away-from-home channels, where it has a majority share position. This more than offset the overall underlying share gains.

Volume and Pricing

Price/mix was down 4%, driven by adverse channel and package mix in key markets due to the coronavirus outbreak. Also, negative mix in the Global Ventures and Bottling Investments segment impacted price/mix. Concentrate sales were 6 percentage points below unit case volume, backed by the cycling of the timing of shipments from the prior year along with rationalization of stock levels after safety stock building in the first quarter.

Coca-Cola’s total unit case volume was down 16% in the second quarter on declines in all operating segments owing to pressures in the away-from-home channels due to the coronavirus outbreak.

Moreover, the company pointed out that global unit case volume increased on a sequential basis since April, with a 25% decline recorded in April and a 10% fall witnessed in June. Additionally, July-to-date unit volume fell by mid-single digits. The sequential gain is mainly attributed to a gradual improvement in the away-from-home channels alongside sustained growth trends in the at-home channels. The company attributes gains in the away-from-home channels to the easing of restrictions related to the lockdowns. Further, it expects the trend to continue in the second half of 2020.

Category Cluster Performance: Sparkling soft drinks’ unit case volume fell 12% (compared with a 2% decline in the prior quarter), driven by declines in India, Western Europe and the fountain business in North America, mainly owing to a decline in away-from-home channels. The Coca-Cola trademark fell 7%, with Coca-Cola Zero Sugar declining 4%. Volume for juice, dairy and plant-based beverages declined 20% (compared with a 6% fall in the last reported quarter). This category was primarily impacted by softness in the Asia Pacific, and Europe, Middle East & Africa operating segments.

Water, enhanced water and sports drinks fell 24% (compared with 2% growth in first quarter), mainly owing to declines in the Asia Pacific, particularly for the lower-margin water brands. Tea and coffee volume dropped 31% (compared with a 6% decline in the first quarter), owing to temporary closures of nearly all of the Costa retail stores in Western Europe.

Segmental Details

Revenues declined 16% for North America, 25% for Latin America, 23% for the Asia Pacific, 37% for Europe, Middle East & Africa (“EMEA”), 38% for Bottling Investments and 53% for Global Ventures segments.

Organic revenues fell 13% in Latin America, 18% in North America, 22% in the Asia Pacific, 35% in EMEA, 52% in Global Ventures segments and 30% in Bottling Investments.

Margins

Comparable currency-neutral operating income declined 25% year over year, driven by soft revenues stemming from the pandemic, partly offset by effective cost management across all segments and the timing of expenses. Comparable operating margin contracted 30 basis points (bps) to 30%. In dollar terms, comparable operating income declined 28.9% to $2,154 million.

Guidance

Though the company did not provide guidance for the third quarter and 2020 due to the uncertainties related to the coronavirus pandemic, it outlined the expected currency impacts on its results for both periods.

For 2020, it estimates currency headwinds of 3-4% on comparable net revenues and of high-single digits on comparable operating income, based on current rates and hedge positions. The company expects underlying effective tax rate of 19.5% for 2020.

For the third quarter, it expects currency impacts of 3-4% on comparable net revenues and 7-8% on comparable operating income.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Coke has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Coke has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.