Beverages giant Coca-Cola Co. (KO) is scheduled to announce its third-quarter results before the market opens today. On average, 11 analysts surveyed by Thomson Reuters expect the company to post earnings of $0.82 per share for the quarter, with estimates ranging between $0.80 and $0.85 per share. Analysts' estimates typically exclude special items. Sales for the quarter are estimated to be $8.12 billion, representing a 3.2% fall from last year.
In the same quarter a year ago, the Atlanta, Georgia-based company had recorded net income of $1.89 billion or $0.81 per share, and adjusted net income of $1.93 billion or $0.83 per share, on net operating revenues of $8.39 billion.
Coca-Cola expects currencies to have an estimated 12% to 14% negative impact on third-quarter operating income, including the anticipated benefits of the company's hedging coverage and the exchange rates it is cycling in the prior year, and a low single-digit negative impact on fourth-quarter operating income.
The foreign currency is very much important for Coca-Cola, as about 85% of its profit reportedly is from sales in foreign countries. The rising dollar continues to be a challenge, as the international revenues become fewer while translated back into US dollars.
The ongoing trend in the current market, with consumers continuing to prefer healthier juices and teas for soft drinks, is also a concern for the world's biggest beverage marker. However, latest analysis reportedly note that the tide is turning and the recession has resulted in people returning to the soft drink market.
Meanwhile, the long term outlook, according to reports, are working against soft drink markers, as the US lawmakers are facing increasing pressure to consider taxes on sugary sodas, which are blamed for rising obesity rates.
Coca-Cola, aiming to make a difference, announced in September that it plans to include energy information, such as calories, kilocalories, kilojoules, per serving on the front of nearly all product packages in a move to increase consumers' awareness about the calorie content of its beverages. Coca-Cola is the first company in the beverage industry to make such commitment.
Back in July, Muhtar Kent, chairman and chief executive officer, Coca-Cola, had stated, "We continue to deliver solid operating performance. In the first half of the year, we delivered volume and profit results in line with our long-term growth targets, despite very challenging global economic conditions. We outperformed the nonalcoholic ready-to-drink industry in most of our key markets and drove further global volume and value share gains. Our consistent strategies are working, and together with our productivity efforts, we are prudently focused on investing in the long-term growth of our resilient business."
The company also said then that it remains on track to achieve our $500 million target in annualized savings by 2011 and expect to deliver more than half of the savings by the end of this year.
Regarding the company's 2020 Vision, Kent said, "Our priorities remain centered on superior execution to drive value for today while strategically investing in growth for tomorrow. Over the next decade, we expect to see a global economy inevitably strengthened by attractive demographic shifts, rapid urbanization, renewed entrepreneurial energy and improved consumer sentiment. These trends bode well for the future of The Coca-Cola Company and our system."
Coca-Cola, a Dow component, manufactures nonalcoholic beverage concentrates and syrups, and principally offers sparkling and still beverages. The company markets its nonalcoholic beverages under the Coca-Cola, Diet Coke, Fanta, and Sprite brand names.
In an October 8 research note, Credit Suisse increased its price target on Coca-Cola stock to $62 from $57, while maintaining its Outperform rating, to reflect the increased valuations for the sector since March. The brokerage's tweaked forecast for the third quarter calls for adjusted earnings per share of $0.81, which was increased from prior forecast due to slightly better margin assumptions and improved FX expectations.
According to the analyst Laboy, investors would focus on Coca-Cola's outlook for the domestic market, as Pepsico, Inc.'s (PEP) acquisition of its North American bottlers is progressing. For Coke, it starts to require that North America keeps pace with Pepsi's model and that management reaches for higher hanging fruit internationally, delivering a promising vision for the year 2020.
In its preceding second quarter, Coca-Cola reported a 42% rise in profit to $2.05 billion or $0.88 per share, helped by lower one-time charges and unit volume growth. Meanwhile, quarterly adjusted net income dropped 10% to $2.15 billion or $0.92 per share on negative currency impact. Coca-Cola also reported a 9% fall in net operating revenues to $8.27 billion. In the second quarter, worldwide unit case volume, however, grew 4%, with a 5% rise in international volume. Unit case volume growth increased strongly in key emerging markets with 33% growth in India and 14% growth in China.
Rival PepsiCo, Inc. on October 8 reported a 9% growth in third-quarter net income to $1.72 billion or $1.09 per share, helped by productivity and cost control across its businesses, and excluding items, core earnings per share for the quarter rose 2% to $1.71. The Purchase, New York-based food and beverage giant, which holds about one-third of the U.S. market share and is the second largest soft drink major in the world, reported a 1.5% decline in net revenues to $11.08 billion, while net revenue grew 5.0% on a constant currency basis.
Plano, Texas-based non-alcoholic beverages maker Dr Pepper Snapple Group, Inc. (DPS) is slated to release its third-quarter earnings results on November 5. Wall Street analysts estimate earnings of $0.49 per share for the quarter on revenues of $1.44 billion, compared to prior year's earnings of $0.45 per share and revenues of $1.51 billion, respectively. Formerly, Dr Pepper was the American beverage unit of British confectionery manufacturer Cadbury plc (CBY, CBRY.L, CDSCF.PK).
Earlier, Dr Pepper Snapple president and chief executive officer, Larry Young said, "As we look ahead, we remain confident that our advantaged portfolio will continue to deliver industry leading results. With a less onerous input cost environment, we will take full advantage of marketplace investment opportunities to support the long term health of our brands and will leverage our productivity office to drive further efficiencies in our business."
KO closed Monday's regular trading session at $54.79, down $0.22 or 0.40%, on a volume of 10.3 million shares. In the past 52 weeks, shares have been trading in a broad range of $37.44 to $55.50.
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