On February 13th, Coca-Cola surpassed Wall Street’s expectations for fourth-quarter revenue, showcasing robust performance attributed to elevated product prices and resilient demand, particularly for its flagship beverage.
Consumer Spending Trends and Price Adjustments
Despite implementing price hikes over multiple quarters, Coca-Cola continues to observe enthusiastic consumer spending, particularly in settings such as dining out and entertainment experiences like movies and sports. This trend contrasts with the recent performance of rival PepsiCo, which reported a sales decline for the first time in 14 quarters due to price hikes resulting in a 4% decline in volumes.
In the fourth quarter, Coca-Cola recorded a 2% increase in unit case volumes alongside a notable 9% rise in average selling prices. However, the company anticipates a slowdown in organic revenue growth, expressing concerns that the benefits derived from price adjustments may begin to wane. Consequently, Coca-Cola forecasts organic revenue growth of 6% to 7% for fiscal year 2024, compared to the 12% increase witnessed in 2023.
Market Response and Analyst Insights
Ahead of market opening, shares of Coca-Cola surged approximately 1%, reflecting investor confidence in the company’s performance. Wedbush analyst Gerald Pascarelli commended Coca-Cola’s organic revenue forecast, considering it to be better than anticipated and notably robust compared to PepsiCo’s projection of a 4% rise in organic revenue.
Profitability Projections and Margin Improvement
Coca-Cola anticipates annual adjusted profit growth to range between 4% and 5%, slightly below market estimates of 4.5% growth. The company attributes its improved operating margin of 21%, compared to 20.5% in the previous year, to a combination of easing input costs and strategic price adjustments implemented during the quarter.
Coca-Cola’s net revenue surged by 7.4% to reach US$10.95 billion, surpassing analysts’ expectations of US$10.68 billion. Similarly, the company’s adjusted profit of 49 cents per share aligned with market estimates, indicating steady performance in line with industry expectations.
Market Commentary and Comparative Performance
Dave Wagner, portfolio manager at Aptus Capital Advisors, which holds shares in PepsiCo, remarked, “Coca-Cola’s results were much better than PepsiCo’s, as Coke continues to benefit from being able to pass on price increases.” This observation highlights Coca-Cola’s adeptness in leveraging pricing strategies to sustain growth and profitability amid market challenges.
| Metric | Q4 2023 Results | Analysts’ Estimate |
|---|---|---|
| Net Revenue | US$10.95 billion | US$10.68 billion |
| Adjusted Profit Per Share | 49 cents | 49 cents |
Coca-Cola’s fourth-quarter performance underscores the company’s ability to capitalize on resilient consumer demand and strategic price adjustments, leading to favorable revenue outcomes. Despite concerns regarding potential revenue growth moderation, Coca-Cola remains positioned for continued profitability and market resilience.
Featured image credit: filadendron via iStock