The Coca-Cola Company (KO – Free Coca-Cola Stock Report) reported generally encouraging results for its June quarter. Organic revenues rose 6% from the prior-year period, with 3% growth in unit case volumes and a 2% improvement in price/mix contributing to the advance. Meanwhile, comparable earnings finished at $0.63 a share, up 3% year over year and two pennies ahead of our estimate.
The beverage giant seemed especially pleased with the performance of its sparkling soft drinks portfolio, including the flagship Coca-Cola brand, which posted 4% volume growth. In particular, Coca-Cola Zero Sugar continues to make progress, posting its seventh consecutive quarter of double-digit volume growth. The company also introduced its first energy drink under the Coca-Cola label in April. The product is now available in 14 markets and should reach another six countries before 2019 is done.
Elsewhere, the company is looking to make deeper inroads into the coffee market following last January's acquisition of Costa Coffee. The first-ever Costa Coffee ready-to-drink chilled beverage is now available in Great Britain, Costa's home market, and will be rolled out to additional countries in quarters ahead. Other initiatives involving roast and ground coffee, ready-to-drink products, and vending machines are also in the works.
Looking ahead, the company has adopted a slightly more optimistic outlook for the 2019 full year. For instance, organic revenues are now expected to rise 5%, up from earlier guidance of a 4% advance, while comparable currency neutral operating income is now expected to climb 11%-12%, versus a 10%-11% growth outlook at the outset of the year. One of the few discouraging notes was foreign currency, with management now anticipating that headwinds in this area will reduce comparable operating income by 7%-8% this year, slightly ahead of its earlier guidance of 6%-7%. Meanwhile, Coke made no change to its 2019 earnings outlook, which calls for share net to finish essentially flat with last year's tally of $2.08. For our part, we continue to look for earnings to edge ahead 1%, to $2.10.
The release of June-quarter results provided a notable boost to Coca-Cola stock. In fact, the shares climbed about 5% in price on the news to a 52-week high. Overall, investor support for this equity has picked up nicely over the past year, and it is pegged to outperform the broader market in the six to 12 months ahead, as well. Too, this issue's defensive attributes, including a top score (100) for Price Stability and dividend yield of roughly 3%, continue to make it a good selection for conservative accounts. That said, the P/E multiple has become a bit elevated by historic standards, and the stock's total return potential to 2022-2024 appears limited.
About the Company:The Coca-Cola Company is the world's leading marketer of ready-to-serve, nonalcoholic beverages. On any given day, 1.7 billion individual servings of the company's brands are consumed by people around the globe. The Atlanta-based company currently has more than 500 wholly owned and licensed brands, including 15 that generate $1 billion or more in annual sales.
– Robert M. Greene
