Companies and Brands
Coca-Cola Lowers Growth Outlook After Whiffing on Q3 Estimates
Published:
Last Updated:
Currency exchange rates provided a net 1% gain on comparable net revenues after adjusting for structural changes. Excluding the impact of structural changes, comparable currency neutral operating income rose by 5% in the quarter.
The company’s outlook for the fourth quarter and the full year have changed, and not for the better. The impact of Coke’s structural changes is now forecast to cost the company 1% to 2% of net revenues and approximately 2% of operating income in the fourth quarter. Currency exchange rates are expected to cost the company’s operating income 6% over the full year and 7% in the fourth quarter. Coca-Cola still expects to buy back $2.5 billion of its own shares, at the low end of the prior estimate of $2.5 to $3 billion.
The company’s CEO said:
Earlier this year, we announced five strategic priorities to restore momentum and reinvigorate long-term sustainable growth. While we have begun to see early signs of progress, we recognize that we need to increase the scope and pace of change as we continue to face a challenging macroeconomic environment. We are therefore taking actions to strengthen our long-term financial performance, including further aligning our organization and our incentive plans to drive revenue and profit growth, increasing our productivity target to $3 billion in annualized savings by 2019, streamlining and simplifying our organization, and proceeding with plans for refranchising the majority of Company-owned North American bottling territories by the end of 2017.
The company also released a more detailed description of its plan to reinvigorate growth. Coke will maintain its long-term high single-digit EPS growth target, adjust its net revenue target to mid single-digit growth and target profit before tax in place of operating income to account for increased equity income growth. The company’s pretax EPS growth target is 6% to 8%, and Coke expects to fall short of that target in 2014 and does not expect 2015 “to be significantly different from 2014.”
The headwind is currency exchange rates, and the reason for the slower growth is that U.S. sales are stagnant and international sales are not growing fast enough to overcome the stronger dollar. Coke is not the only consumer products company that will face these issues, but the stock was getting beaten up pretty good Tuesday morning.
Coca-Cola’s shares were down about 3.8% in premarket trading, at $41.66 in a 52-week range of $36.89 to $44.87. Thomson Reuters had a consensus analyst price target of around $45.60 before the report.
ALSO READ: The 20 Most Profitable Companies in the World
Is Your Money Earning the Best Possible Rate? (Sponsor)
Let’s face it: If your money is just sitting in a checking account, you’re losing value every single day. With most checking accounts offering little to no interest, the cash you worked so hard to save is gradually being eroded by inflation.
However, by moving that money into a high-yield savings account, you can put your cash to work, growing steadily with little to no effort on your part. In just a few clicks, you can set up a high-yield savings account and start earning interest immediately.
There are plenty of reputable banks and online platforms that offer competitive rates, and many of them come with zero fees and no minimum balance requirements. Click here to see if you’re earning the best possible rate on your money!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
