Investors are bracing for some bad news from Coca-Cola (NYSE:KO) when the beverage giant announces its first-quarter results on April 21. The company was optimistic about seeing only a modest impact from the COVID-19 outbreak in late February. But that outlook worsened less than a month later, when the soda titan had to pull its financial guidance as social distancing efforts slowed economic growth to a crawl in key markets such as the U.S. and Europe.

CEO James Quincey this week likely won't have much more clarity to offer shareholders about the timing of Coke's eventual rebound. But the report should provide new details on its financial strength and management's flexibility to navigate through the historic sales disruption.

Two glasses of soda on the table in a restaurant

Image source: Getty Images.

Sales updates

The fiscal first quarter ran through late March, which was a period that included aggressive social distancing efforts by governments in China, Europe, and the U.S. These moves sharply curtailed customer traffic at restaurants while cancelling sporting events, concerts, and all other heavily attended entertainment opportunities. Coke counts these "on premises" sales as a significant part of its business, and that's the key reason executives withdrew their 2020 guidance in late March.

The company didn't estimate the financial hit from the loss of all those drink-buying opportunities, saying only that the impact could be significant. We'll find out on Tuesday just how far sales have fallen from recent trends that had previously shown accelerating sales growth.

Organic revenue rose 7% in the last quarter, with sales volumes up in every region except for the flat U.S market. That metric will be pressured from the loss of social soda consumption, but Coke might also show a related spike in sales across its retailing network as people stocked up on their favorite beverages for at-home drinking.

Finances and outlook

Coke's distribution network is one of its biggest competitive assets, but the global nature of the pandemic makes it expensive to maintain while sales volumes are depressed. That drop will be temporary, but because the timing and scope of the eventual rebound is unclear, Coke recently tapped debt markets for an extra $5 billion of bonds. 

Executives should spend much of this week's earnings call explaining how that move is boosting their financial flexibility. They'll likely detail the other changes Coke is making to preserve cash, including temporary layoffs.

As for its outlook, Coke isn't likely to reinstate anything approaching the detailed outlook it affirmed as recently as February, which called for organic sales to rise by 5% to mark a slight slowdown from last year's 6% increase. Yet the company might have some reasons for cautious optimism as it looks at how a few of its markets have rebounded in recent weeks after COVID-19 dangers subsided. Coke should have some fresh data on consumption trends in China, which has restarted key parts of its economy after shutting down for most of February. 

Consumers likely began resuming their normal pattern of buying and consuming soft drinks and bottled waters outside of their homes in these markets, and Coke's short-term earnings outlook will depend on how quickly management sees that process happening in Europe and the U.S. over the next few months.