Zinger Key Points
- Coca-Cola beat Q4 sales and earnings per share estimates, reporting $11.5 billion in revenue and $0.55 EPS.
- Coca-Cola's Christmas ad was created with generative AI, which led to a "faster" production at a "lower cost."
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Coca-Cola Company‘s KO fourth-quarter earnings exceeded expectations amid strong “fundamentals” despite currency headwinds and a significant market share grab from its rival PepsiCo Inc. PEP.
What Happened: “We won overall share and had broad-based share gains across our global beverage categories,” said James Quincey, the chairman and CEO of the beverage company.
The company’s robust 2024 results, which included volume growth, robust organic revenue growth, and comparable gross and operating margin expansion, underscore this positive momentum.
Nik Modi of RBC Capital Markets, a veteran beverage industry watcher, expressed astonishment at Coca-Cola’s current strength in a conversation with Yahoo Finance.
While sparkling soft drinks continue to perform, the company is seeing “momentum in other categories like value-added dairy and tea,” demonstrating a successful diversification strategy, added Quincey.
Furthermore, Maaza, a mango-flavored fruit drink brand in India, surpassed the $1 billion milestone in that country, it is “now our 30th billion-dollar brand,” the management said.
Why It Matters: Coca-Cola beat its fourth-quarter sales and earnings per share estimates, reporting $11.5 billion in revenue and $0.55 EPS. The company projects 5-6% organic revenue growth and 8-10% currency-neutral EPS growth for fiscal year 2025, though overall EPS growth is expected at 2-3%. Free cash flow is forecast at approximately $9.5 billion.
“Given the strong momentum of our business, we’re confident we can deliver on our 2025 guidance and longer-term objectives,” added CEO Quincey.
However, the first quarter net revenue is expected to include a 3-4% currency headwind.
CFO John Murphy said, “We have an unwavering priority to grow our dividend as we’ve done for 62 consecutive years.”
Additionally, this year, for “the first time,” the Coca-Cola Christmas ad was created with generative AI, which led to a “faster” production at a “lower cost” said Quincey. “The power of emerging technologies like generative AI are still at early stages and we will continue to lead and iterate our approach,” he added.
Price Action: The shares rose by 4.73% to $67.60 apiece on Tuesday and slid by 0.67% in after-hours, whereas the exchange-traded fun tracking S&P 500 index, SPDR S&P 500 ETF Trust SPY rose 0.076%.
KO shares have gained 9.31% on a year-to-date basis, whereas it was up only by 13.23% over the last one year.
The average price target among 24 analysts tracked by Benzinga is $71.3 with a ‘buy' rating. The estimates range from $64 to $80 apiece. Recent ratings from RBC Capital, Jefferies, and JP Morgan suggest a $71.33 target, implying a potential upside of 6.23%.
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