Coca Cola Exceeds Estimates - Analyst Blog

By Zacks Equity Research,

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The Coca Cola Company ( KO ) reported operating earnings per share of 79 cents per share for the fourth-quarter 2011, ahead of the Zacks Consensus Estimate of 77 cents. Operating earnings were $3.84 per share, exceeding the Zacks Consensus Estimate by 2 cents.

The fourth quarter and fiscal year 2011 earnings were also higher than the prior-year EPS by 9.7% and 10.0%, respectively.

In both the current and the prior-year quarters, Coca Cola was impacted by restructuring charges and costs related to global productivity initiatives as well as the acquisition of Coca Cola Enterprises ' ( CCE ) North American operations and net losses related to the economic hedges, primarily commodities, partially offset by transaction gains.

Including these one-time items, the company reported earnings of 72 cents per share in the fourth quarter and $3.69 per share in the fiscal 2011.

The results were ahead of the long-term targets of Coca Cola, encouraged by strong growth volume globally and increased value share.

Earnings Details

During the reported quarter, Coca Cola's net revenues saw robust growth of 5% to $11.0 billion. The growth was mainly attributable to solid growth in concentrate sales and positive price/mix. Currency had a negative 1% impact on net revenue in the quarter. The comparable net revenue was also up by 5% during the reported quarter.

In fiscal 2011, both net revenue and comparable net revenue grew 33% to $46.5 billion, reflecting growth in concentrate sales, positive currency benefit, positive price/mix and the acquisition of CCE's former North America operations, partially offset by the effect of structural changes.

The results were almost in-line with the Zacks Consensus Estimate.

Geographically, the Eurasia & Africa division witnessed volume growth of 4% year-over-year led by India, which surged 20%, followed by Middle East and North Africa posting a year-over-year volume growth of 7% in the fourth quarter. In fiscal 2011, the Eurasia & Africa division witnessed volume growth of 6% year-over-year.

The Latin American segment volumes increased 4% in the quarter, driven by 4% growth in Mexico, 8% in South Latin Region and 6% growth in Central Latin region. Brazil volume was even in the quarter. In fiscal 2011, volume grew 6%.

The Pacific Group's volume climbed up 5% in the quarter, with 10% growth in China, 5% growth in Japan, 11% growth in Thailand and 25% growth in South Korea. In fiscal 2011, volume grew 5%.

Volume in Europe grew 1% in the quarter, while it grew 2% in fiscal 2011. In North America, volume increased 1% in the quarter and 4% in the full year 2011. Bottling Investments Group's volume grew 3% in the quarter, reflecting growth in Germany, India and China. Volume was even in fiscal 2011.

Coca Cola's gross profit during the quarter soared by 7% to $6.6 billion compared to $6.2 billion a year ago. In fiscal 2011, gross profit increased 26% to $28.3 billion, due to increased commodity costs. The operating profit increased by 68% to $2.0 billion from $1.2 billion in the prior-year period, while it increased 20% to $10.2 billion.

Other Financial Details

Coca Cola exited the year with $12.8 billion in cash and cash equivalents and long-term debt of $13.7 billion at the end of December 31, 2011. Cash from operations was $9.5 billion for both the full-year 2011 and full-year 2010. Cash from operations was up 7% in 2011, excluding the significant pension contributions made in the first quarter of 2011.

The company also repurchased $2.9 billion of shares in 2011, at the high end of the previous guidance of $2.5 to $3.0 billion. Coca Cola expects net share repurchases of an additional $2.5 to $3.0 billion for the full year 2012.

The effective tax rates for the quarter and full year 2011 were 24.3% and 24.5%, respectively. The underlying effective annual tax rate on operations was 23.9%. For 2012, the company expects its underlying effective tax rate on operations to be in the range of 24.0% to 25.0%.

Coca Cola successfully completed its four-year productivity program, with annualized savings over $500 million, exceeding the original target range of $400 to $500 million.

In 2012, the company plans to launch both a new global productivity initiative and an expanded Coca Cola Refreshments (CCR) integration effort under one joint "Productivity and Reinvestment" program representing a combined incremental $550 to $650 million in annualized savings by the end of 2015.

The first initiative, a new four-year global productivity program, will target $350 to $400 million in annualized savings by the end of 2015. Secondly, the CCR integration efforts are now expected to capture total annualized savings of $550 to $600 million, or an incremental $200 to $250 million. The company expects to capture this incremental $200 to $250 million in annualized savings by the end of 2015 and estimates that total costs associated with the capture of all CCR-related synergies will increase from $425 million to about $800 million, as the company implements new initiatives to capture the higher annualized savings target.

Coca Cola which competes with PepsiCo Inc. ( PEP ) currently holds a Zacks #3 Rank. On a long-term basis, we maintain a Neutral rating on the stock, which translates into a short-term Hold rating.

COCA-COLA ENTRP ( CCE ): Free Stock Analysis Report
COCA COLA CO ( KO ): Free Stock Analysis Report
PEPSICO INC ( PEP ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CCE , KO , PEP

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