Coke Boosted by Sales of Soda, Tea Drinks

Coke’s net revenue fell 3 percent to $12.16 billion in the three months ended July 3. Below, I review key highlights from today’s report.

The U.S. dollar has risen more than 8% against a basket of major currencies so far this year.

Coca-Cola raised prices at home in order to offset the impact of the stronger dollar, which contributed to reducing the value of overseas sales. Coca-Cola Enterprises Inc (CCE) reported last quarter earnings on April 30.

Sales of Diet Coke are dropping so precipitously that Pepsi-Cola surpassed Diet Coke to become the number two best-selling soda brand in the USA earlier this year.

Coca-Cola’s unanticipated pricing powerPerhaps the biggest surprise in today’s earnings report was the strength Coca-Cola exhibited in its North American business segment. This is significant for several reasons.

Moving on to revenues, the industry giant is reported to have surpassed analysts’ expectations by a mammoth of $100 million, at least reflecting a YoY slide of 3%, which may have mixed effects on the stock price movement today, although, investors are advised to remain cautious, as the trading session begins. CCE stock price has outperformed the S&P 500 by 0.4%. This represents a $1.32 annualized dividend and a dividend yield of 3.20%. And it’s a bet that appears to have paid off.

On the earnings call, Coke gave more detail: Smaller packages are growing much faster than larger packages, and smaller packs have a higher price per gallon/liter/case. Around 2% of the company’s shares, which are float, are short sold.

Without providing specifics, the company said overall advertising spending saw a double-digit percentage increase during the quarter. Charging more for beverages has boosted Coke’s revenue as the company rides out the turbulence. That increase was due to the company’s expanded distribution of Monster energy drinks. Analysts expected revenues of $12.06 billion.

For the quarter, Coca-Cola’s total volume for carbonated drinks in North America rose just 1 percent.

In the latest quarter, Coke said world-wide soda volumes grew 1%, while noncarbonated beverage volumes grew 5%. Last year, however, its ranking slipped to No. 3, with regular Pepsi taking its No. 2 spot, according to Beverage Digest.