Shares of Coca-Cola (KO) dropped on Thursday morning after the company provided disappointing guidance for 2019. The company also said it is seeing the impact of some increasing uncertainty and volatility in global macroeconomic conditions, but that demand for its brands remains "healthy."
EARNINGS AND GUIDANCE: Coca-Cola on Thursday reported fourth quarter comparable continuing operations earnings per share of 43c, in line with analysts' estimates. Revenue of $7.1B was slightly above the $7.03B consensus, but a decline of 6% from the year-ago period. The company attributed the revenue decline to the impact of currency and re-franchising its bottling operations. Sparkling soft drinks declined 1% in the quarter and juice, dairy and plant-based beverages fell 2%, the company said, while tea and coffee grew 3% in Q4. Unit case volume fell 1% in North America and 2% in Latin America in the quarter ended December 31.
Looking ahead, Coca-Cola said comparable continuing operations EPS could be down 1% to up 1% in 2019 vs. $2.08 in 2018. The company is also predicting approximately 4% growth in organic revenues and 12% to 13% growth in comparable currency neutral net revenues, which includes an 8%-9% tailwind from acquisitions, divestitures and structural items. Analysts currently expected EPS for the fiscal year of $2.22 on revenue of $33.28B. For the first quarter, Coca-Cola sees a 6%-7% tailwind from acquisitions, divestitures and structural items on comparable net revenues, as well as a 6%-7% currency headwind.
EXECUTIVE COMMENTARY: On the company's earnings conference call, CEO James Quincey said he is "confident" the company can deliver against its 2019 guidance. While he admitted that the company is seeing the impact of some increasing uncertainty and volatility in global macroeconomic conditions, he maintained that demand for categories remains "healthy." He said he expects global growth to be "slightly" lower in 2018. Quincey also sees freight costs remaining above historical levels, but doesn't see the same level of year-over-year increases as in 2018.
WHAT'S NOTABLE: In addition to battling currency headwinds, rising transportation costs last year forced it to raise prices on its soft drinks in North America. CEO Quincey has also been looking to pivot away from sugary soda amid a broader decline in soda consumption. Following the company's recent $5.1B purchase of Costa, the company plans to target the ready-to-drink coffee market in the U.S. Coca-Cola is also the biggest shareholder at energy drink maker Monster Beverage (MNST).
PRICE ACTION: In morning trading, shares of Coca-Cola are down 6.6% to $46.50.
OTHERS TO WATCH: Rival PepsiCo (PEP), which reports earnings on Friday morning, is down 1.5% to $112.41.
Coca-Cola
-3.51 (-7.05%)
Monster Beverage
-0.75 (-1.26%)
PepsiCo
-1.71 (-1.50%)