Coke Boosts EPS on Share Buybacks

The Coca-Cola Co. (NYSE: KO) reported second-quarter results this morning, posting EPS of $1.21 on revenue of $13.1 billion. Net earnings were slightly lower compared with last year: $2.79 billion versus $2.8 billion a year ago. The consensus estimate called for EPS of $1.19 on revenue of $12.98 billion.

The company increased its worldwide sales of carbonated beverages by 3% and its sales of noncarbonated drinks by 9%. Cost of goods rose 5% in the quarter, but currency exchange rates reduced those costs by 3%. Commodity prices were “moderately higher” than in the second quarter of 2011.

As the dollar gains strength against most other currencies, Coke expects to feel a significant impact:

Including our hedge positions, current spot rates and the cycling of our prior year rates, we estimate the unfavorable currency impact on full-year 2012 operating income to be at the high end of a mid single-digit range, and the unfavorable currency impact on operating income in the third quarter is anticipated to be 8% to 9%.

But the good news for investors in the quarter was the impact of the company’s share buyback. Coke repurchased $1.6 billion in common stock. The company plans to complete its two-for-one stock split on July 27th as well.

The company is also exposed to higher commodity prices going forward as the U.S. drought pushes up corn prices. Coke uses corn syrup sweetening for many of its drinks, and corn prices are at a 10-month high right now and still climbing.

Shares of Coca-Cola are up about 1.3% in pre-market, trading at $77.44 in a 52-week range of $64.34 to $79.36.

Paul Ausick