The Coca-Cola Company
) delivered adjusted operating earnings of 89 cents per share in
the first quarter of 2012, beating the Zacks Consensus Estimate by
a penny. Earnings were also above the prior-year adjusted earnings
of 86 cents per share driven by strong revenue and volume growth
which made up for margin declines.
COCA COLA CO (
In the quarter, net revenues increased 6% year over year to $11.1
billion, benefiting from an increase in concentrate (syrups,
powders, etc. used in finished beverages) sales and positive
pricing. The results were above the Zacks Consensus Estimate of
$10.8 billion. Currency had a negative impact of 1% in the quarter.
Quarter in Detail
The cola giant witnessed volume growth of 5% in the reported
quarter with gains in all geographic regions as well as across all
non-alcoholic ready-to-drink (NARTD) beverages, whether sparkling
(NARTD with carbonation) or still (NARTD without carbonation).
Sparkling beverages, like Coca Cola, Fanta and Sprite, recorded
global volume expansion of 4% in the quarter, driven by strong
brand investments and innovation. Specifically, the Coca Cola soft
drink grew 4% in terms of volume driven by strong performances
particularly in the fast growing emerging markets of Brazil,
Russia, India and China.
Still beverages grew 9% in terms of volume, registering better
volume growth than the popular soft drinks. The company's packaged
water, ready-to-drink tea and coffee, energy drinks and sports
drinks all registered impressive growth in the quarter.
Geographically, volume was up 6% in international markets while
North America recorded a volume growth of only 2% as Coca Cola
shifts focus to the fast-expanding emerging markets with the
developed markets nearing saturation.
The company recorded adjusted consolidated gross margin of 60.7% in
the first quarter of 2012 down from 62.5% in the prior-year quarter
due to rising commodity costs. Adjusted operating margin was 23%,
down from 23.8% recorded in the prior-year quarter due to gross
margin declines and higher selling, general and administrative
Geographically, the Eurasia & Africa division recorded revenues
of $684 million, up 4% over the prior-year quarter as benefits from
concentrate sales and positive price/mix were partially offset by
currency headwinds. The segment witnessed volume growth of 9% year
over year led by India, which surged 20%, followed by the Middle
East and North Africa posting a year-over-year volume growth of 14%
in the quarter. Adjusted operating income was up 19% in the quarter
driven by revenue growth and operating expense leverage.
The Latin American segment recorded revenues of $1.18 billion, up
3% over the prior-year quarter as benefits from concentrate sales
and positive price/mix were tempered by currency headwinds.
Volumes increased 5% in the segment, driven by 9% in both South
Latin Region and Central Latin region, 4% growth in Brazil and 3%
growth in Mexico. Volume growth, however, lagged the 7% surge
witnessed in the prior-year quarter. Adjusted operating income was
up 11% in the quarter benefiting from volume growth and favorable
The North American segment recorded revenues of $4.9 billion, up 5%
on the back of volume growth and positive price/mix. Volumes
increased 2% in the segment with all NARTD beverages recording
volume and value share gains. Adjusted operating income was however
down 9% in the quarter due to strong comparisons in the prior-year
quarter and one less selling day in the current quarter.
The Pacific Group recorded revenue of $1.4 billion, up 12% over the
prior-year quarter benefiting from positive concentrate sales,
price/mix and currency impacts. The Pacific Group's volume climbed
8% in the quarter, with growth of 9% in China, 3% in Japan, 24% in
Thailand and 6% in Philippines. Adjusted operating income was up 5%
in the quarter.
Europe recorded revenues of $1.2 billion, down 2% over the
prior-year quarter as benefits from price/mix were offset by
declines in concrete sales and negative impact from currency.
Volume in Europe grew 1% in the quarter as positive volume growth
in Spain, Germany and Central and Southern Europe offset declines
in Northwest Europe and Nordics. Adjusted operating income was
nevertheless down 2% in the quarter.
Bottling Investments Group's volume grew 11% in the quarter,
reflecting growth in Germany, India and China and the Philippines.
We currently have a Neutral recommendation on The Coca Cola
Company. The stock carries a Zacks #3 Rank (a short-term Hold
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