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New York - Coca-Cola posted first-quarter results that mostly met analysts’ expectations, underwhelming investors who’d been optimistic that a stronger turnaround was taking hold.
Earnings were 45 cents a share, excluding some items, the Atlanta-based company said in a statement on Wednesday. Analysts estimated 44c, on average. Sales fell 4% to $10.3bn, matching analysts’ average projection.
The results show Coca-Cola’s strategy of costs cuts and price increases is paying off, just not fast enough for some investors’ liking. While Chief Executive Officer Muhtar Kent has made progress by revamping the company’s bottling system and starting a $3bn dollar productivity program, the maker of Diet Coke and Fanta is continuing to struggle with health-conscious consumers’ shift away from drinking soda.
Shares of Coca-Cola fell 1.6% to $45.85 at 13:23 in early trading. The stock was up 8.5% this year through Tuesday, beating the 2.8% gain for the Standard & Poor’s 500 Index.
Currency effects
Coca-Cola is facing currency headwinds abroad and declining soda consumption at home. To combat those trends, the company has introduced smaller bottles and cans that cost more per ounce of liquid than traditional cans and bottles. The efforts have helped somewhat. Coca-Cola’s operating margin, excluding currency effects and other items, expanded to 24.8% from 23.4%.
The company, which makes Simply juices and Honest Tea, also is putting a greater focus on noncarbonated drinks. And just ahead of earnings, the company announced a new marketing initiative that will combine all of its namesake sodas into one brand. Coca-Cola Classic, Diet Coke, Coke Zero and Coke Life will be part of the campaign, which will start in Mexico.
“Things are truly getting better at Coke, and the underlying improvement in fundamentals has created a positive marginal change story, which we think is why the stock has outperformed,” John Faucher, an analyst at JPMorgan, wrote in a note before the results were released.
“That said, with valuation moving higher and earnings likely flat to down until the back half of 2017 as a result of the bottler refranchising, we see limited room for further upside from here.”
