A month has gone by since the last earnings report for Coca-Cola (KO Quick QuoteKO - Free Report) . Shares have added about 5.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Coke due for a pullback? 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 Q3 Earnings & Sales Beat Estimates

Coca-Cola has reported better-than-expected top and bottom-line results for third-quarter 2022. The company’s results have benefited from the continued momentum from the first half of 2022. Driven by the strong results, the company has raised its growth expectations for organic revenues and comparable earnings per share for 2022.

Comparable earnings of 69 cents per share beat the Zacks Consensus Estimate and our estimate of 64 cents and rose 7% from the year-ago period. However, unfavorable currency translations hurt earnings by 11 percentage points. Comparable currency-neutral earnings per share rose 18%.

Revenues of $11,063 million surpassed the Zacks Consensus Estimate of $10,600 million and improved 10% year over year. Revenues also beat our estimate of $10,557.8 million. Organic revenues rose 16% from the prior-year quarter. Coca-Cola’s top line benefited from strong revenue growth across its operating segments, aided by an improved price/mix and increased concentrate sales.

In the reported quarter, Coca-Cola gained a global value share in total non-alcoholic ready-to-drink beverages. The company benefited from underlying share gains in both at-home and away-from-home channels.

Volume and Pricing

In the reported quarter, concentrate sales advanced 4% year over year, while the price/mix rose 12%. The price/mix benefited from pricing actions in the marketplace across all operating segments, coupled with a favorable channel and package mix, owing to the lapping of last year’s pandemic-led disruptions. Price/mix also gained from a positive segment mix.

Coca-Cola’s total unit case volume grew 4% in the third quarter, backed by strength across all operating segments, ongoing investments in the marketplace and strength in the away-from-home channel. Growth was mainly led by improved trends in the developed markets, which recorded mid-single digits growth. Meanwhile, the developing and emerging markets rose in the low-single digits. Growth in developed markets was driven by Mexico, Western Europe and the United States. The developing and emerging markets benefited from growth in India, China and Brazil.

Coming to the category cluster performance, volume benefited in the reported quarter from growth in trademark Coca-Cola; sparkling flavors; the nutrition, juice, dairy and plant-based beverages; and hydration, sports, coffee and tea categories.

Sparkling soft drinks’ unit case volume improved 3% year over year, driven by robust gains across all geographic operating segments, led by India, Mexico and China. Trademark Coca-Cola volumes were up 3% year over year on solid gains in all regions. The sparkling flavors category improved 3% on growth in the Asia Pacific and Latin America. The volume for Coca-Cola Zero Sugar rose 11% on double-digit growth across developed markets, and high-single-digit growth across developing and emerging markets.

Volume for nutrition, juice, dairy and plant-based beverages was flat. The category primarily gained from fairlife in the United States, Minute Maid Pulpy in China and Maaza in India, offset by declines in local brands in Eastern Europe.

The hydration, sports, coffee and tea category grew 5% in the third quarter. Coca-Cola witnessed 6% growth in hydration on improvements across the Asia Pacific and Latin America. Sports drinks rose 6% due to solid performances by Aquarius, BODYARMOR and Powerade. Tea volume was flat, as gains in Brazil and Mexico were offset by a decline due to the suspension of business in Russia. The coffee business witnessed 5% growth on the cycling impacts of the closure of Costa retail outlets in the U.K. in the prior year and the expansion of Costa coffee across markets.

Segmental Details

Revenues rose 4% for EMEA, 12% for Latin America, 21% for North America, 4% for the Asia Pacific and 7% for Bottling Investments, while the same declined 10% for Global Ventures.

Organic revenues improved 20% in EMEA, 18% in Latin America, 14% in North America, 14% in the Asia Pacific, 5% in Global Ventures and 19% in Bottling Investments.

Margins

In dollar terms, the operating income increased 7% year over year to $3,088 million, including a 10-point impact of currency headwinds. Comparable operating income rose 8.1% year over year. Comparable currency-neutral operating income advanced 18% on strong organic revenue growth across all segments, offset by higher operating costs and marketing investments.

The operating margin of 27.9% in the third quarter contracted 100 basis points (bps) from 28.9% in the prior-year quarter. The comparable operating margin contracted 50 bps to 29.5%, driven by increased operating costs, higher marketing investments, the impact of the BODYARMOR acquisition and currency headwinds, which more than offset growth in the top line.

Guidance

Coca-Cola, on Mar 8, 2022, suspended its business in Russia due to the conflict in Ukraine. As a result, it expects a 1% impact on unit case volume, along with a 1% impact on revenues and operating income (earlier 1-2% impact). Adjusted earnings are likely to be affected by 3 cents.

Management has also raised its organic revenue forecast for 2022. It anticipates organic revenue growth of 14-15% compared with 12-13% growth mentioned earlier. Comparable revenues are expected to be impacted by a 7% currency headwind compared with a 6% headwind stated earlier. The guidance includes a 2% positive impact from acquisition and divestiture.

Management expects an impact of a high-single-digit percentage from commodity price inflation on comparable cost of goods sold. The company anticipates an underlying effective tax rate of 19% compared with 19.5% mentioned earlier.

Comparable currency-neutral earnings per share are estimated to increase 15-16% compared with 14-15% growth mentioned earlier. The company anticipates comparable earnings per share growth of 6-7% compared with 5-6% growth mentioned earlier. Its earnings per share view includes a headwind of 9% from currency and 1% from acquisitions and divestitures.

For fourth-quarter 2022, comparable revenues are expected to include an 8% currency headwind and a 1% positive impact from acquisitions. Comparable earnings per share are estimated to include a currency headwind of 9%.

Management envisions an adjusted free cash flow of $10.5 billion for 2022, including $12 billion in cash flow from operations. Capital expenditure is likely to be $1.5 billion.

The company has also provided its initial view for 2023. It remains optimistic about the top-line momentum. However, KO expects global inflation to impact expenses across the board in 2023. It expects commodity prices to continue to be volatile. The company anticipates an underlying effective tax rate of 19.5% for 2023.

For 2023, comparable revenues are expected to include a 5-6% currency headwind. Comparable earnings per share are estimated to include a currency headwind of 7-8%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -6.17% due to these changes.

VGM Scores

At this time, Coke has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, 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 D. 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.

Performance of an Industry Player

Coke is part of the Zacks Beverages - Soft drinks industry. Over the past month, PepsiCo (PEP Quick QuotePEP - Free Report) , a stock from the same industry, has gained 3.4%. The company reported its results for the quarter ended September 2022 more than a month ago.

PepsiCo reported revenues of $21.97 billion in the last reported quarter, representing a year-over-year change of +8.8%. EPS of $1.97 for the same period compares with $1.79 a year ago.

PepsiCo is expected to post earnings of $1.64 per share for the current quarter, representing a year-over-year change of +7.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.4%.

PepsiCo has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.