Coca-Cola Reports Fizzy First Quarter Results

Tuesday saw soft drinks giant Coca-Cola KO release solid earnings for the first quarter 2012, highlighted by strong volume and revenue growth, with volume and value share gains across every nonalcoholic ready-to-drink beverage category that it competes in. Frankly, the news could barely be better for KO. Every one of the geographic operating groups delivered volume growth, while four out of those five also delivered comparable currency neutral net revenue growth. CEO Muhtar Kent could barely contain his glee, saying that "Our first quarter results underscore The Coca-Cola Company's resilience and a long-term focus on quality growth in every region of the world. Despite a continued mixed global environment, our hardworking teams achieved broad-based volume and value share gains in nonalcoholic ready-to-drink beverages globally, with volume growth across every geographic operating group and revenue growth ahead of our long-term growth target." To be fair, he has every right to be delighted. Coca-Cola saw strong global growth of 5% in 1Q12. Meanwhile, North America volume grew 2% and international volume grew 6%. Also growing 6% were first quarter reported net revenues, with comparable currency neutral net revenues grew 7%, a number that was driven by a solid price/mix of 4%. The company's reported operating income grew 10% for the quarter, with the reported and comparable EPS coming in at $0.89. Earnings were $2.05 billion, or 89 cents per share, up from $1.90 billion, or 82 cents per share, the previous year. Revenue rose 6% to $11.4 billion. JP Morgan published a research report on Monday stating that Coke ended Q1 positively, with March volumes better than anticipated in markets like Brazil and Japan. When Coke reports on Tuesday, we think these markets should offset weakness in Western Europe. After talking margins (and subsequently EPS) down at CAGNY, it thinks the quarter will be solid, and at least in-line with expectations. On Tuesday, ValuEngine published a report saying that it believes KO should be trading at $72.26. This makes KO 0.25% overvalued. Fair Value indicates what we believe the stock should be trading at today if the stock market were perfectly efficient and everything traded at its true worth. For KO, it bases this on actual earnings per share (EPS) for the previous four quarters of $3.87, forecasted EPS for the next four quarters of $4.15, and correlations to the 30-year Treasury bond yield of 3.11%.