Coca-Cola said Wednesday the coronavirus pandemic is still hurting its sales, but cost-cutting efforts helped it top analysts’ earnings estimates.
The company also released its first forecast since the crisis hit its business. Analysts appear to be more optimistic than the soft-drink company about the speed of its recovery.
Shares of the company rose nearly 2% in premarket trading.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: 47 cents, adjusted, vs. 42 cents expected
- Revenue: $8.6 billion vs. $8.63 billion expected
The beverage giant reported fourth-quarter net income of $1.46 billion, or 34 cents per share, down from $2.04 billion, or 47 cents per share, a year earlier.
In response to the pandemic, Coke has accelerated its workforce restructuring and slimmed down its portfolio. The company recorded a $15 million charge related to these efforts and a $4 million benefit from discontinuing its Odwalla brand. About 11% of Coke’s global jobs have been cut, excluding its bottling investments and global ventures segments. Coke expects to spend $350 million to $550 million on severance.
Excluding restructuring charges and other items, Coke earned 47 cents per share, topping the 42 cents per share expected by analysts surveyed by Refinitiv.
Net sales dropped 5% to $8.6 billion, missing expectations of $8.63 billion. Organic revenue, which doesn’t include the impact of acquisitions, divestitures or foreign currency, fell 3% in the quarter.
Unit case volume, which strips out the impact of foreign currency and pricing, shrank by 3%. All four of its beverage segments reported volume declines, and Latin America was the only geographic region to report volume growth.
The company said the resurgence of the virus around the world in December and January has put pressure on demand. So far in February, global volume has declined by mid-single digits.
“The progress we made in 2020, including the actions taken to accelerate the transformation of our company, gives us confidence in returning to growth in the year ahead,” CEO James Quincey said in a statement. “While near-term uncertainty remains, we are well-positioned to emerge stronger from the crisis.”
In the fourth quarter, sparkling soft drinks saw volume decline by 1%. Its namesake soda reported volume growth of 1% in the period, and Coke Zero Sugar’s volume rose 3%.
The company’s juice, dairy and plant-based beverage segment saw volume shrink by 2%. While Coke’s Simply juice and Fairlife milk performed well, they weren’t enough to offset a decline in the Minute Maid fountain business.
Volume of its water, enhanced water and sports drinks fell by 9%. But its tea and coffee business reported the biggest contraction in volume. Demand fell 15%, largely due to the pressure on its Costa cafes and Dogadan tea brand in Turkey.
Coke is expecting organic revenue growth in 2021 in the high single digits and adjusted earnings growth in a range of high single digits to low double digits. Analysts’ prediction of 10.5% growth for its full-year earnings was on the higher end of the range.
Coke warned its first-quarter results will include a 2% currency headwind, based on current rates, but it didn’t provide any specific estimates for the period.
The company also shared an update on its ongoing litigation with IRS. A U.S. Tax Court said in November that Coke must pay the bulk of its $3.4 billion tax bill. The company said in its earnings report that it “believes that it will ultimately prevail.” Coke has calculated that its potential liability could be as much as $12 billion, in addition to increasing its underlying tax rate by 3.5%.
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