) fourth quarter adjusted earnings of 45 cents per share
marginally beat the Zacks Consensus Estimate of 44 cents by a
penny. Moreover, earnings grew 15% from the prior-year quarter as
tepid revenue growth was offset by solid operating margins, which
gained from two extra selling days and lower-than-expected
Revenues and Margins
In the quarter, net revenue increased 4% year over year to
$11.04 billion, as benefits from volume growth and concentrate
(syrups, powders, etc. used in finished beverages) sales were
largely offset by an almost flat price/mix. Constant currency
revenues increased 5% in the quarter as currency hurt revenues by
1%. The top-line results marginally missed the Zacks Consensus
Estimate of $11.54 billion.
The company recorded adjusted consolidated gross margin of
60.2% in the fourth quarter of 2012, down 10 basis points both
year over year and sequentially. The gross margin result was in
line with management's expectation of being sequentially lower
than both second and third quarter margins of 60.3% due to the
currency and mix shift headwinds.
Adjusted selling, general and administrative (SG&A)
expenses increased 1% on a currency neutral basis to $4.42
billion. Excluding the impact of currency, SG&A expenses were
flat due to better operating expense leverage in the quarter.
Adjusted operating margin was 21.7% in the quarter, up 140
basis points from the prior-year quarter. The constant currency
operating income increased 14% to $2.48 billion in the quarter,
in line with management's expectation of double-digit
Operating profits accelerated as the operating expense
leverage was better in the quarter due to two additional selling
days. Lower-than-expected headwinds from currency also benefited
operating profits. Foreign exchange unfavorably impacted
operating income in the fourth quarter by 4%, lower than
management's expectations of a negative impact in the
Volume and Pricing Growth in Detail
The cola giant witnessed volume growth of 3% in the reported
quarter. International volumes grew 4% against a 1% increase in
North America. The company saw volume growth in North America,
Eurasia and Africa, and Latin America while European volumes
declined due to persistent economic uncertainty. Moreover, China
and Japan volumes declined in the quarter, which hurt overall
volumes of the Pacific segment, for the second quarter in a
Among the non-alcoholic ready-to-drink (NARTD) beverages,
sparkling beverages, like Coca Cola, Fanta and Sprite, grew 1% in
terms of volume, lower than last quarter's 3% growth. Changing
consumer preferences, increasing health consciousness and growing
regulatory pressures are affecting the company's sparkling
Still beverages such as Minute Maid, Simply and POWERade grew
9% in terms of volume, registering much better volume growth than
the popular soft drinks as consumers have grown health conscious.
Coca-Cola is slowly expanding its portfolio of non-carbonated
drinks to reduce its huge dependence on carbonated beverages.
Among the still beverages, packaged water, ready-to-drink tea and
energy drinks recorded double-digit growth in the quarter.
The impact of price/mix was almost flat in the quarter as only
the Latin American segment showed some positive growth.
Eurasia & Africa
division recorded revenues of $697 million, up 5% over the
prior-year quarter as benefits from volume growth and concentrate
sales were offset by price/mix and currency headwinds. Constant
currency revenues increased 9% in the quarter.
The segment witnessed volume growth of 10% year over year led
by 13% organic growth in Middle East and North Africa, 13% in
Turkey and 12% in Russia. Sparkling beverages volume was up 7%
versus 23% volume growth for still beverages. Adjusted operating
income was up 23% on a currency neutral basis in the quarter to
$273 million driven by pricing gains and better operating expense
segment recorded revenues of $1.27 billion, up 8% from the
prior-year quarter levels driven by benefits from concentrate
sales, positive volume and price/mix, which offset headwinds from
currency and structural changes. Constant currency revenues
increased 12% in the quarter.
Volumes increased 5% in the segment, with Brazil, South Latin,
Latin Center and Mexico all showing positive volume growth.
Volume growth was better than the 4% growth witnessed in the
Sparkling beverages volume was up 3% versus 16% volume growth
for still beverages. Adjusted operating income was up 16% on a
currency neutral basis to $715 million in the quarter, benefiting
from volume growth and favorable pricing in addition to better
operating expense leverage.
segment recorded revenues of $5.29 billion, up 6% as gains from
volume growth and structural changes was offset by an almost flat
price/mix. North American overall volumes grew 1% in the
Sparkling beverage volume declined 2% against 8% volume gain
for still beverages as American are increasingly avoiding sugary
sodas. Adjusted operating income was up 11% on a currency neutral
basis to $713 million in the quarter driven by positive volume
growth and better operating expense leverage.
segment recorded revenues of $1.35 billion, down 1% over the
prior-year quarter due to lukewarm volume growth and a flat
price/mix. Constant currency revenues were flat in the
The Pacific Group's volume grew only 2% in the quarter, below
both prior-year and sequential levels. Volume growth in Thailand,
South Korea and Philippines was offset by sluggish growth in
Japan and China as the latter continues to see some economic
slowdown. Adjusted operating income was up 10% on a currency
neutral basis to $427 million in the quarter due to favorable
geographic mix, productivity gains and better operating expense
segmentrecorded revenues of $1.14 billion, down 6% over the
prior-year quarter as volumes, price/mix and currency declined in
the quarter. Constant currency revenues declined 4% in the
quarter. Volumes declined 5% in the quarter.
Sparkling beverage volume declined 5% while still beverages
went down 3% in the quarter. Adjusted operating income improved
12% on a currency neutral basis to $670 million due to better
operating expense leverage and tight cost management.
In fiscal 2012, the company witnessed a 3.0% increase in
revenues to $48.02 billion, slightly missing the Zacks Consensus
Estimate of $48.13 billion.
Adjusted earnings were $2.01 per share, which beat the Zacks
Consensus Estimate of $2.00 by a penny. Adjusted earnings
increased 5.0% from the prior year.
Other Stocks to Consider
Coca-Cola currently carries a Zacks Rank #4 (Sell). Rival
) will report on Feb 14. Some of Coca-Cola's bottling companies
are currently doing well and have a bright outlook. These include
Coca-Cola FEMSA S.A.B de C.V
Coca-Cola Enterprises Inc.
), both carrying a Zacks Rank #2 (Buy)
COCA-COLA ENTRP (CCE): Free Stock Analysis
COCA COLA CO (KO): Free Stock Analysis Report
COCA-COLA FEMSA (KOF): Free Stock Analysis
PEPSICO INC (PEP): Free Stock Analysis Report
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