Coca-Cola (NYSE:KO) just closed the books on a sparkling fiscal 2019. After boosting its outlook on two consecutive occasions, the beverage giant beat its upgraded forecast to finish the year on a strong note, both in terms of sales growth and profitability.

In a conference call with Wall Street analysts, CEO James Quincey and his team broke down that strong performance and explained why they're predicting only a slight slowdown for the fiscal year ahead.

Let's look at some highlights from that presentation.

A glass filled with ice and cola with another glass of soda in the background

Image source: Getty Images.

Making the right moves

We continue to see a strong response from the strategic actions we've been taking, now in the second year of delivering at the mid to high end of our long-term growth algorithm, with contribution from both volume and price/mix.
-- CFO John Murphy

It can be hard to spot concrete trends in its massive $37 billion global business, but the recent uptick is impossible to miss. Coke noted high-single-digit sales gains in emerging markets like Brazil and mid-single-digit growth in developed markets. These combined to deliver 6% organic gains for the year, or 2 full percentage points above the company's initial 2019 target.

Most of that growth came from pricing increases and Coke's shift toward marketing smaller-sized beverages. Yet the company achieved higher overall volume, too. Meanwhile, executives were happy to find that many of their major initiatives, including expanding distribution points around Latin America, are working. "We see the right strategies taking hold," Quincey explained, "underpinned by a growing and vibrant industry."

Gaining efficiency

We expanded margins even as we accelerated reinvestments in the business, helping us to drive double-digit profit growth on a currency-neutral basis.
-- Murphy

Coke reported a 1-percentage-point drop in operating margin, but that decline was entirely due to currency exchange rate moves. Adjusting for those yields a 1.5-percentage-point increase, which was supported by faster growth and aggressive cost-cutting.

Cash flow was a notable bright spot, with free cash jumping 28% for the year to $8.4 billion. This success allowed the company to pour resources into its growth initiatives while amassing more of a buffer for its dividend. As a result, investors might reasonably expect higher stock repurchase returns in 2020, assuming operating trends don't take a surprise turn sharply lower.

Looking ahead

Key drivers of our operational outlook center around our continued focus on innovation, revenue growth management, and improved execution, all supported by a comprehensive approach to brand building.
-- Murphy

Coke is taking a slightly conservative approach by predicting organic sales growth will slow to 5% in 2020 compared last year's 6% increase. That deceleration might seem stark considering sales jumped 7% in the fourth quarter. But management explained that the period contained an extra sales day, which means normalized growth was actually closer to 6%.

While sales gains might slow, the earnings outlook is brightening thanks to currency exchange trends. Coke is predicting a 7% boost in adjusted profit, in fact, compared to this past year's 1% decrease. Looking across the competitive landscape, executives see a few major economic risks in parts of its global portfolio, but they broadly expect consumer spending to grow consistent with the robust 2019 trend. Investors will have to be patient, too, since most of Coke's projected expansion will occur in the back half of the year.

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