Coca-Cola Q3 2024 Earnings: Flat Sales But Weak Demand
TradingKey - When we think of refreshing and sweet soft drinks, the first one that comes to mind is always “Coke”. The company behind it – Coca-Cola Co (NYSE: KO) – has been around since the 19th century as it was founded in 1892.
Indeed, famous investing guru Warren Buffett has previously said that he’s happiest when eating dessert and drinking coke. Shifting tastes and more health-conscious consumers has meant that Coke has had to evolve its line-up of drink offerings to include things like “sugar-free” soft drinks as well as more options on bottled water.
It hasn’t been easy for the company. In recent years, the stock has underperformed the broader market. Over the past five years, Coke shares have gained 26.5%, well below the 91.8% that the S&P 500 Index has gained over the same timeframe.
Coke reported its latest Q3 2024 results on Wednesday (23 October) before the market opened. Here’s what investors should know about whether the company’s latest numbers had any fizz.
Pricing power makes up for lack of demand
For the third quarter of 2024, Coke posted adjusted net sales of US$11.95 billion, which was roughly flat versus the prior-year period. However, Coke’s organic revenue (if stripping out the impact of acquisitions, divestitures, and currency) actually rose 9% year-on-year.
However, the key metric of demand – unit case volume – actually fell 1% during the quarter on the back of weaker demand in international markets. This particular metric is a better reflection of broader demand for Coke as it strips out the impact of pricing and foreign currency.
This persistent weak demand is something that has been seen across the beverage industry as rival PepsiCo Inc (NASDAQ: PEP) recently cut its full-year forecast for organic revenue when its released its latest earnings two weeks ago.
Coke has managed to see its sales hold up mainly due to its pricing power but this higher pricing is also have an undesirable effect on demand. Indeed, Coke CEO said on the earnings call that a large set of consumers are “exhibiting value-seeking behaviour” that includes buying fewer packs of Coke.
US holding up but international weaker
For Coke, its home market of the US actually exhibited relatively strong unit case volume performance as it was flat for the quarter, versus a 2% decline for its Europe, Middle East, and Africa (EMEA) and Asia-Pacific regions.
Its pricing rose 10% during the quarter and this helped offset the volume declines in specific segments, particularly in bottled water where there was a 6% drop. Meanwhile, its juice, dairy, and plant-based beverages division saw a 3% fall in volume. All this suggests that consumers are paring back on drinks that they don’t see as “necessary”.
In terms of guidance, it was “steady as she goes” with Coke now expecting organic revenue growth of around 10% for the whole of 2024. That’s at the high end of its prior guided range of 9% to 10%. The company is set to forecast its full-year 2025 earnings when it reports Q4 2024 results.
Coke shares ended the trading day down 2.1% while year-to-date its stock is up 13.7%, underperforming the S&P 500 Index’s 22.2% advance so far in 2024.
