The world-famous Coca-Cola (KO +0.50%) company is scheduled to report fiscal 2021 fourth-quarter earnings on Feb. 10. The beverage giant saw its sales decline at the onset of the pandemic.
Coca-Cola has a strong presence in away-from-home locations like restaurants, theme parks, and movie theaters. So its fate is more connected to how safe people feel going places. Fortunately, as billions of people got vaccinated, Coca-Cola's sales rebounded above 2019 levels. However, when Coca-Cola reports fourth-quarter earnings on Feb. 10, investors will be watching to see if the rise of the omicron coronavirus variant slowed its recovery.
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People are enjoying more of Coca-Cola's beverages
Indeed, in its most recent quarter ended Oct. 1, overall revenue grew by 16% from the same quarter a year earlier. That's impressive growth for a company that has struggled to increase revenue in the past decade. The boost can be attributed to two primary causes: People consumed a greater quantity of its products, and they paid higher prices for the pleasure.
As I mentioned earlier, Coca-Cola has a strong presence in away-from-home channels. The company has diligently worked to secure exclusive relationships with venue operators. For instance, it is the exclusive beverage partner for McDonald's. So when economy's reopening gained momentum, Coca-Cola experienced an outsize benefit. Further, beverages consumed away from home are priced significantly higher. You can perhaps recall your own experience in the price you pay for a bottle of Coke at a grocery store vs. what you pay for that same quantity at a movie theater or restaurant.
Speaking about the topic in its Q3 conference call, CEO James Quincey said, "Although not yet back to 2019 levels as a percent of our business, we saw sequential improvement in away-from-home volumes on a two-year basis as consumers returned to many of their former routines. At-home volumes also showed ongoing strength even as away-from-home channels improved."
According to Quincey's comments, there is additional room for the away-from-home business to recover to pre-pandemic levels. The rise of the omicron variant threatens to slow that recovery. If folks don't feel safe going to restaurants and movie theaters, where they are sure to encounter groups of people, consumption away from home will decrease. Moreover, with so many people becoming ill and calling out sick from work, it is challenging for venue operators to serve customers, leading to reduced hours of operations and lower serving capacity.
What this could mean for Coca-Cola investors
Analysts on Wall Street expect Coca-Cola to report revenue of $8.97 billion and earnings per share (EPS) of $0.41. If it meets those projections, that would be an increase of 4.2% and a decrease of 12.76%, respectively, from the year-ago period. Note that Coca-Cola's fiscal fourth quarter in 2021 has six fewer days than it did in 2020.
Coca-Cola's stock is up 9.8% in the past three months. The company's near-term prospects remain solid, and it has handled supply-chain shortages and rising costs with skill. If the rise of the omicron variant did not alter the recovery in away-from-home channels, it would be further support for the stock.
