Can Coca-Cola’s Q4 2024 Earnings Finally Start Fizzing for Investors?

TradingKey - Soft drinks and sugary beverages have earned a bad reputation in recent times given their links to obesity and a range of other health ailments. Despite that, one of the biggest soft drink companies in the world – Coca-Cola Co (NYSE: KO) – has been able to continue growing its revenue.

However, the share price performance of Coke has been another matter. Shares are up only 8% in the past 12 months and have an even more dismal return of only 7.7% over the past five years. While the company has enormous pricing power, it hasn’t been able to fully diversify away from its core sugary drinks offerings in recent years.

A solid dividend yield of around 3% has cushioned some of that poor stock performance for shareholders. However, they will be keen to hear what the company has to say when Coke releases its Q4 2024 results today (11 February) before the market opens. Here’s what investors should watch as the iconic brand reports its latest numbers. 

Will pricing power be maintained?

Given Coke’s falling volume shipments, investors will be watching how pricing power holds up in its latest quarter. In Q3 2024, coke reported that unit case volume – a key metric of shipped products that strips out the impact of foreign currency – actually fell 1% year-on-year on the back of weaker demand in international markets.

Even with that decline, Coke had actually delivered adjusted net sales of US$11.95 billion in Q3 2024 – broadly flat year-on-year – but if investors stripped out the impact of acquisitions, divestitures, and currency, core revenue actually expanded an impressive 9% year-on-year.

During that earnings call, Coke CEO James Quincy commented that a large set of consumers are “exhibiting value-seeking behaviour” and that includes buying fewer packs of Coke’s drinks. 

Whether that’s foregoing more Coke products or buying non-coke, cheaper generic beverages, the end result is the same – less unit shipment volume for Coke. That’s something investors will be watching as Coke is a consumer bellwether for the US economy.

Sales expected to decline, expanding into new products

As for Q4 2024 expectations for Coke, Wall Street is forecasting the company to post earnings per share (EPS) of US$0.52 – up 6% year-on-year – but is also expected overall net sales to decline by 2.5% year-on-year to US$10.68 billion.

In this scenario, pricing power becomes even more critical for Coke to maintain its profitability. Coke’s core North America market will be a crucial one to watch as it makes up over one-third of the company’s total profit.

The shift towards less sugary drinks and healthier beverage options looks likely to only accelerate. The new Health Secretary in President Trump’s cabinet – Robert F Kennedy Jr – is famously anti-sugar is on a crusade to “make America healthy again”.

Fortunately for Coke shareholders, the company has some other areas of burgeoning growth. Coke’s premium milk and protein shake brand – Fairlife – makes up only 5% of its US business but actually contributed around 35% of the company’s overall sales growth in 2024, according to BNP Paribas research analyst Kevin Grundy.

He expects Fairlife to grow by 20% annually over the next five years, with demand continuing to increase and additional manufacturing capacity coming online. In this new health and wellness era, higher protein intake is one of the key habits that individuals are encouraged to instil into their everyday routines.

Tariffs and the US dollar pose issues for Coke

Two big unknowns that investors will want to hear more on are the US dollar and tariffs. On the currency side, a strong greenback could put up some obstacles for Coke given its reliance on international markets – nearly 70% of its sales come from markets outside the US. 

Indeed, the US Dollar Index (DXY) is up around 8% since the end of September to mid-January. While it has pulled back a little, Coke’s management still expects a currency headwind of around 10% on adjusted EPS for Q4 2024. 

With tariffs being imposed on steel and aluminium imports by President Trump, investors will also be keen to hear how that impacts Coke given its reliance on aluminium cans. A shift away from those kinds of cans, pivoting to a different product mix, or if the tariffs will impact earnings materially will all be closely watched as Coke reports.

For investors in Coke, they’ll be hoping that the beverages giant can overcome these issues and return to growth in the era of “no sugar” and “low-sugar” living.