Coca-Cola's revenue misses Wall Street expectations
Coca-Cola Co reported quarterly revenue that came in short of Wall Street expectations on Tuesday, hurt by declines in Europe and Asia where it sold more lower-priced drinks amid economic uncertainty the company expects to continue into 2013.
The world's biggest soft-drink maker, with brands such as Sprite, Fanta and Minute Maid, also said revenue and profit were hurt by the stronger U.S. dollar, which reduces the value of overseas sales.
Still, earnings were in line with analysts' expectations and Coca-Cola shares fell only 27 cents, or 0.7 percent, to $37.86 on the New York Stock Exchange.
Coca-Cola gets most of its sales from outside the United States, so shifts in currency can have a big effect. In the third quarter that ended on September 28, the strong dollar shaved 5 percentage points of growth from net revenue and 7 points from operating income.
Aside from currency, results in Asia, particularly China, disappointed some analysts, though Sanford Bernstein analyst Ali Dibadj said it was not surprising, given the softening of consumer sentiment and the slowing of an economy that had been a growth engine for multinational companies in recent years.
"China is slowing down a little bit for the long-term benefit of China. As China will settle, there's a little bit of adjustment," Chief Executive Officer Muhtar Kent told Reuters. "Take a plane -- when it leaves cruising altitude and is going to land, the ride gets rougher. But it will settle."
Kent said he expects settling into a lower growth rate will happen within the next few months.
Sales volume rose 3 percent in the Pacific region; JP Morgan analyst John Faucher expected 4.5 percent growth.
In addition, European consumers have been hurt by the debt crisis. In the latest quarter, consumers were buying bottled soft drinks to take home, which is less profitable for the company than drinks sold in restaurants.
"Go to Madrid and look at the cafes. There aren't a lot of people sitting around drinking Cokes or coffee or whatever," Gary Fayard, chief financial officer, said on a conference call.
Also, European sales are growing most Eastern and Central Europe where prices are lower, Kent said. This helps volume of sales but hurts revenue.
Third-quarter net income for Coca-Cola was $2.31 billion, or 50 cents per share, up from $2.22 billion, or 48 cents per share, a year earlier.
Excluding items, earnings were 51 cents per share, in line with analysts' average estimate, according to Thomson Reuters I/B/E/S.
Revenue rose 1 percent to $12.34 billion. Analysts were expecting $12.41 billion.
Worldwide sales volume rose 4 percent in the quarter, driven by gains in all regions. Volume rose 1 percent in Europe, 2 percent in North America, 5 percent in Latin America and 11 percent in the Eurasia and Africa region.
Sales volume in the Philippines was flat, due to typhoons. In Japan, soda volume fell 5 percent from the year-earlier period when new products boosted sales. Volume rose 2 percent in China.
Closer to home, North American revenue and profit rose, helped by a recent acquisition and the impact of certain commodities hedges.
Coke is also seeing tougher competition from PepsiCo Inc , which is working hard to improve its North American beverage business. It has increased marketing spending with a focus on core brands like Pepsi-Cola and analysts have been saying that the renewed effort is working.
Through Monday's close, Coke shares were up 9 percent year-to-date, while the Dow Jones U.S. Beverage Index gained 10 percent and the Standard & Poor's 500 index rose 14.5 percent.
(Additional reporting by Brad Dorfman in Chicago; Editing by Maureen Bavdek and Phil Berlowitz)