So what's the deal with Coke, anyway? It gave investors conflicting views of the future yesterday.
The Coca-Cola Co. (NYSE: KO) -- Papa Coke -- issued a press release brimming with "Confidence in Second Quarter and Full Year Business Outlook." (Analysts predict $0.96 in profits per share for the quarter; $3.07 for the year.)
Meanwhile, Coke bottler Coca-Cola Enterprises (NYSE: CCE) -- Baby Coke -- took an entirely different view of things. Baby Coke lamented "current economic and marketplace trends," predicting a "mid to high single-digit" decline in Q2 earnings per share. And while it says it will try to achieve previous guidance of $1.50 to $1.55 per share this year, it won't know until July whether that goal is realistic.
Here and there
One clue to the variable fortunes at Papa Coke and Baby Coke, it seems, can be found in where they do business. Papa Coke specifically pointed to its international business as contributing to its confidence in upcoming results. Papa gets more than 70% of its revenue from outside North America, and as management pointed out, derives more than 80% of operating profits abroad as well.
Baby Coke, however, is not so geographically fortunate: 70% of its sales happen right here at home, while much of the foreign loot goes to brother bottlers like Coca-Cola Hellenic (NYSE: CCH) and Coca-Cola FEMSA (NYSE: KOF), and kissing cousins such as Chile's Embotelladora Andina (NYSE: AKO-A).
This leaves Baby Coke more subject to the whims of the U.S. marketplace and its cash-strapped consumers. Regarding which, Baby says we're buying fewer higher-margin 20-ounce bottles of pop these days -- perhaps because two-liter containers are a better bargain for a nation of consumers rediscovering the merits of bargain-hunting. If you recall, Baby Coke had made selling a greater proportion of high-margin, smaller-volume drinks a keystone of its profits strategy for this year. Apparently, that plan is not working out so well.
I'd like to say this result came as a surprise ... but in fact, it should surprise no one. My Foolish colleague Matthew Reilly told investors more than a month ago that Papa Coke was a better buy than its favorite son. For that matter, I suspect there's a reason Papa kicked its kids out of the house back in the '80s.
And I suspect this is it.
For more on Coke's recent family history:
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