Coca-Cola (NYSE:KO) released its fourth-quarter 2019 earnings on Thursday before the markets opened for trading, handing investors evidence of vigorous top-line expansion, healthy net earnings, and ample cash flow. The world's largest beverage company was able to gain market share in sparkling beverages while also enjoying admirable pricing power. Below, we'll walk through key details from the quarter and home in on three trends that are undergirding the multinational's recent progress. Note that all comparable numbers that follow refer to those of the prior-year quarter.

Coca-Cola: A bird's-eye view of the numbers

Metric Q4 2019 Q4 2018 Change
Revenue $9.1 billion $7.8 billion 16.7%
Net income $2.0 billion $870 million 130%
Diluted earnings per share $0.47 $0.20 135%

Data source: Coca-Cola.

Key highlights from the quarter

  • After adjusting reported revenue for acquisitions, dispositions, and foreign currency effects, organic revenue still expanded at the impressive rate of 7%.
  • Each of the company's geographical markets realized improvement in product and mix during the quarter, supplementing volume growth. Overall, price and mix contributed 5 percentage points to organic revenue growth, with volume supplying the remaining 2 percentage points of expansion.
  • Operating margin improved by 50 basis points to 23.9%. On an adjusted basis (to account for noncomparable items), operating margin was flat against the prior-year period at 24.8%.
  • The disparity in net earnings between periods shown in the table above is due to asset impairments, transaction losses, and other one-time items in the fourth quarter of 2018. On an adjusted basis, earnings per share (EPS) improved by 1% to $0.44 versus Q4 2018.
  • Coca-Cola's operating cash flow for the full year jumped by 37% to $10.5 billion, while free cash flow expanded by 38% to $8.4 billion.
Close-up of glass soda bottles in a bottling plant.

Image source: Getty Images.

Three trends supporting Coca-Cola's growth

Coca-Cola's healthy top line this quarter can be traced to a number of factors, but three trends are particularly worthy of shareholders' attention. First, the consumer-staples titan continues to enjoy a resurgence in the sales of trademark Coke beverages, especially low-sugar variants of its most popular sodas. In the vast North American market, Coca-Cola Zero Sugar expanded volume by double digits over the last three months. Globally, trademark Coca-Cola beverages saw volume growth in every major geographic region this quarter.

Second, packaging architecture remains a long-term tailwind for the organization. In discussing larger efforts to reduce the calories customers consume, Coca-Cola observed on Thursday that it's been able to increase the sale of sparkling drinks even as beverage calorie consumption has declined. The company's shift toward 7.5-oz. mini-cans and other smaller packaging (which carries higher unit prices) has allowed consumers to treat soda as an acceptable, indulgent refreshment while delivering higher revenue and profitability to Coca-Cola.

Finally, the breadth of Coca-Cola's growth this quarter among both developed and developing markets, from the Asia Pacific region to EMEA (Europe, Middle East, and Africa), indicates that Coca-Cola's "lift and shift" model of transporting brands across borders is beginning to show tangible results. For example, the company cited strength in Topo Chico mineral water in the U.S. (which it's recently expanded from a bottling base in Mexico) and the U.S.-developed Fuze Tea's success in Western Europe as factors in the quarter's revenue growth. Coca-Cola has compressed its time frame for scaling successful local brands to global audiences, and shareholders can expect much more of this activity in the coming quarters.

The outlook for 2020

After expanding organic revenue by 6% in 2019, Coca-Cola projected similar progress in 2020 on Thursday, outlining a year-over-year organic growth rate of 5% for the current 12-month period. Adjusted EPS is expected to increase 7% over 2019's earnings, to $2.25. The beverage giant forecasts operating cash flow of $10 billion this year. With expected capital expenditures of $2 billion, full-year free cash flow should hit $8 billion. The combination of today's impressive results and continued prospects for sharp growth in 2020 were welcomed by shareholders, who pushed shares up 2.5% in midday trade despite a weak broader market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.