Coca-Cola, the iconic soft drink company, is scheduled to announce its Q2 2023 results tomorrow before the markets open, with an investor’s call to follow at 8:30 am Eastern Time. The current FactSet consensus expects the company to post a year-over-year (yr/yr) EPS growth of 3%, translating to $0.72, and revenues climbing 4% to approximately $11.74 billion.
Rival Analysis: KO vs. PEP
Coca-Cola’s (KO) report follows closely on the heels of its main rival, PepsiCo (PEP), which released its Q2 results earlier this month. The overall beverage volumes across all regions saw a slight dip of 1% yr/yr for PepsiCo, indicating persisting negative effects of ongoing inflation trends. In North America specifically, volumes fell by 4.5%.
Contrarily, in the previous quarter, Coca-Cola outperformed PepsiCo in terms of consolidated volume growth. The soft drink giant posted a growth of 3% compared to PepsiCo’s 1% increase. However, the year-end quarter of 2022 saw a 1% decline in KO’s volumes against PEP’s flat growth. These trends suggest that volume growth from KO and PEP tends to stay close to one another, making it reasonable for the market to anticipate minor volume shrinkage for Coca-Cola in Q2.
Given Coca-Cola’s North American market history of surpassing PepsiCo in volume growth in three of the past four quarters, KO may register volumes above PEP’s 4.5% decline in this region in Q2.
Regional Consumer Sentiment
The consumer sentiment, as expected, varies drastically from region to region. Many companies have signaled a slower-than-anticipated economic recovery in China, which could weaken demand in KO’s Asia-Pacific region. In contrast, Europe witnessed a trend where more and more consumers are turning towards private-label alternatives to combat the economic circumstances. Latin America, specifically Mexico, has shown relative resilience with consumers maintaining a positive sentiment due to historically low unemployment levels.
Financial Performance Indicators
A critical development that could potentially bolster Coca-Cola’s financial performance is its amplified focus on its ready-to-drink alcoholic beverage portfolio. The company expressed optimism regarding engagement levels in this category, which could significantly influence this quarter’s results.
KO’s Fairlife brand is another variable that might impact the earnings. The brand faced supply chain disruptions in previous quarters, and positive news about these disruptions being resolved could bode well for the company’s financial performance.
Projections and Guidance
Guidance, of course, always plays a significant role in subsequent price actions. In the last quarter, Coca-Cola reaffirmed its projections for the fiscal year 2023. The company expects EPS to grow by 4-5% yr/yr and anticipates organic revenue growth in the 7-8% range.
The company’s stock performance has been fluctuating throughout the year, down around 1% YTD. However, it has increased nearly 5% from the lows on July 10, indicating investors’ optimism ahead of the Q2 earnings. Resistance remains around $64.5-65.0, while buyers have shown interest around the $59 mark over the past couple of months.
In conclusion, tomorrow’s report will reveal whether Coca-Cola’s strategy and projected growth align with the market’s expectations. It’s a moment investors and industry analysts alike are eagerly awaiting.