- Coca-Cola reported their fourth quarter results, with non-GAAP EPS in line with market expectations. However, this reflected a decline in growth compared to the third quarter of 2022, with revenue beating expectations by 1%, while global unit case volumes decreased by 1%.
- The results for the full year to December 2022 reflected solid revenue growth of $10.1 billion, beating expectations by $180 million for this diversified global beverage company. They expect to deliver organic revenue (non-GAAP) growth of 7%-9% in 2023, despite inflationary and currency headwinds. EPS growth is expected to be subdued to a range of 4%-5%, from $2.48, to $2.57-$2.60 for 2023 due to a moderation in price increases and a cooling in inflation during the course of 2023. This follows a cautious guidance by the group CEO, James Quincy, who was commenting on global macro uncertainties during the Coke results presentation.
- A rise in organic sales of 15% in the fourth quarter, compared to the consensus of 11.1%, reflected the strength of the group’s 200 beverage product profile. North America’s organic sales were 12% higher, with price/mix as the major driver, reflecting Coca-Cola’s pricing power. This strength was also reflected in the strong uplift in Latin America organic sales, which were up by 32%.
- The company’s diversification into brands such as Fanta, Sprite, Schweppes, and ready-to-drink markets such as Jack Daniels and Coke hold promise for opportunities in the alcohol markets, which have potential to become a new growth market for the group, reflecting a shift in consumer drinking tastes.
- Another potential growth node is the company’s entry into the coffee market, with both its own COSTA brand and coffee being a major growth market, with the social aspect of coffee continuing to gain momentum.
- The iconic brand power of the group and diversification away from fizzy drinks into low-sugar beverages bodes well for a potential new long-term growth node for the Coca-Cola group, with management being proactive in terms of changes in consumer preferences by proactive strategic changes to the business model.
- The Coca-Cola group has just announced its 61st consecutive dividend increase of 4.5% to $0.46 for the quarter to December 2022, resulting in an attractive dividend yield of 3.30%. The share price has declined by around 6.5% year-to-date but should be seen as a defensive investment with an extensive global footprint and a diversified business model, with experienced management that has delivered quality results in a challenging macro-operating environment.
By Ron Klipin
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