Coca-Cola (KO) 2022 Q1 Earnings Beat Estimates

Coca-Cola on Monday reported quarterly earnings that beat analysts’ expectations as consumers began to drink more of their namesake soda, Powerade coffee and Costa coffee.

But CEO James Quincy told CNBC’s Sarah Eisen that despite a strong quarter, there are “storm clouds” on the horizon. The company largely withstood inflation challenges during the first quarter and maintained its outlook.

Coke shares rose 2% in premarket trading.

Here’s what the company said compared to what Wall Street expected, based on a survey of analysts at Refinitiv:

  • Earnings per share: 64 cents adjusted vs. expected 58 cents.
  • Revenue: $10.5 billion vs. $9.83 billion expected

Coke reported first-quarter net income attributable to shareholders of $2.78 billion, or 64 cents per share, compared to $2.25 billion, or 52 cents per share, a year earlier.

Excluding merchandise, the beverage giant earned 64 cents per share, beating the 58 cents per share expected by analysts polled by Refinitiv.

net sales rose 16% to $10.5 billion, beating Wall Street’s expectations of $9.83 billion. Organic revenue, excluding the impact of acquisitions and sales, increased 18% for the quarter.

Pricing and assortment, including portfolio-wide price increases, rose 7% qoq, supported by strategies such as bottling beverages in smaller sizes. As inflation puts pressure on Coke’s profit margins and buyers’ wallets, the company said it was expanding its lineup of one-off offerings at “affordable” prices.

High demand and buying trends have led many food and beverage companies to focus on bulk packaging, but smaller packaging has made a comeback in recent months.

Quincy told CNBC that consumers won’t be “endlessly swallowing inflation.” The company sees higher costs for key materials such as high fructose corn syrup, plastic and aluminum.

Quincy said on a company earnings call that Coke is trying to invest in its brands so that consumers are willing to pay more for its drinks. He added that raising prices now is preferable to trying to raise them later in a recession when consumers are more sensitive to price changes.

“We’re making a mistake by deciding to raise prices,” Quincy said on a conference call.

Coke pack volume rose 8% during the quarter. The company posted double-digit volume growth in both the Nutrition, Juice, Dairy and Plant-Based Drinks segments and the Hydration, Sports, Coffee and Tea segment. The company’s production of carbonated soft drinks increased by 7% due to demand for the soda of the same name and its sugar-free version.

In early March, Coke suspended operations in Russia, citing the Kremlin’s incursion into Ukraine. The company said on Monday that the decision is expected to reduce the volume of isolated cases by 1%, and reduce revenue and operating profit by 1-2%. Coke also believes the decision will cut its like-for-like earnings by 4 cents per share.

“We are closely monitoring the side effects of the conflict in Ukraine on consumer health, and we remain ready to change and adapt,” Quincy told analysts in response to the company’s earnings report.

Despite the suspension of its Russian business, the company reiterated its full-year revenue growth forecast of 7% to 8% and like-for-like earnings-per-share growth of 5% to 6%. In the second quarter, Coke expects a headwind of 4% due to foreign exchange.

Read the full earnings report here.

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