Why Coca-Cola Earnings Were Just Good Enough

Coca-Cola Co. (NYSE: KO) reported third-quarter 2018 results before markets opened Tuesday. The soft-drink maker posted adjusted diluted earnings per share (EPS) of $0.58 on revenues of $8.25 billion. In the same period a year ago, the company reported EPS of $0.50 on revenues of $9.06 billion. Third-quarter results also compare to consensus estimates for EPS of $0.55 and $8.17 billion in revenues.

Net income rose 16% for the quarter, from $1.45 billion to $1.88 billion and pretax income jumped 70% from $1.67 billion to $2.85 billion.

Net revenues fell 9% for the quarter. The company attributed the decline primarily to refranchising of bottling territories that reduced sales by 13%. Organic revenues rose by 6% year over year.

The company has repurchased $1.6 billion in stock in the first nine months of the year and net share repurchases (non-GAAP) totaled $707 million.

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In its outlook, the company said it continues to expect full-year adjusted EPS growth of 8% to 10% year over year and at least 4% revenue growth. Both estimates are unchanged from the prior quarter.

Analysts have estimated fourth-quarter EPS of $0.45 and revenues of $7.23 billion. For the full year, analysts currently expect EPS of $2.08 and revenues of $31.84 billion.

CEO James Quincy said:

We continue to be encouraged by our performance year-to-date as we accelerate our evolution as an even more consumer-centric, total beverage company. The recent leadership appointments are intended to help accelerate the transformation of our company.

The company’s results were just okay as far as investors are concerned. The company’s own estimates for full-year results remain the same as they were at the beginning of the year and analysts’ estimates haven’t changed either. Coke’s 3.4% dividend yield is likely the reason that the stock will not move much in either direction after this report.

Coca-Cola’s shares traded down about 0.5% just after Tuesday’s opening bell, at $46.71 in a 52-week range of $41.45 to $48.62. The consensus 12-month price target was $51.07 before this morning’s report.

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