Coca-Cola (KO) is scheduled to report 2022 first-quarter earnings results on Monday, April 25. The iconic beverage brand is thriving as economies reopen and folks visit restaurants more often.
To offset some of the negative impacts of inflation and take advantage of rising consumer demand, Coca-Cola has also raised prices across its portfolio of beverages. The one-two punch is working to boost revenue and profits, and the stock has responded in kind. Here's what investors can look for when Coca-Cola reports its first-quarter results on April 25.
Sales and profits are booming
In its most recent quarter, which ended on Dec. 31, 2021, revenue increased by 10% to $9.5 billion. Sales fell in 2020 for Coca-Cola during the initial phases of the pandemic when folks were spending most of their time indoors. The company generates a substantial part of its sales through away-from-home channels like restaurants, movie theaters, and sports stadiums. Those venues closed for most or part of 2020, hurting Coca-Cola's sales.
To make matters worse, revenue from outside venues is more profitable for the beverage maker. Recall how much you paid for a Coke at a restaurant or movie theater and compare that to what it costs at a grocery store. Of course, the venue operators take their share of the mark-up in the price, but it's a higher margin category for Coca-Cola compared to sales to grocers. Thankfully, with several effective vaccines against COVID-19 developed and administered, governments are removing business restrictions, and folks are moving about more freely. Sales for the year jumped by 17% to $38.7 billion. More impressively, net income at the same time was up by 26% to $9.8 billion.
KO Net Income (TTM) data by YCharts
Management expects the momentum to continue and has forecast revenue growth of 7.5% at the midpoint for 2022. Similarly, Coca-Cola's senior officials expect earnings per share to grow by 5.5%. The risks to this rosy outlook are twofold. The first one is obvious: If the coronavirus pandemic evolves again and forces further business restrictions and lockdowns, sales will slow for Coca-Cola. The second risk concerns how consumers are impacted by rising inflation. Coca-Cola has implemented price hikes, and folks may buy less of its products at higher prices. Nevertheless, rising costs are expected to increase Coca-Cola's cost of goods sold by a mid-single-digit percentage in 2022.
Image source: Getty Images.
What this could mean for Coca-Cola investors
Analysts on Wall Street expect Coca-Cola to report revenue of $9.82 billion and earnings per share (EPS) of $0.58. If the company meets those projections, they would be increases of 8.9% and 5.45%, respectively, from the same period the year before.
The estimates are roughly in line with what management expects for the year, so it shouldn't warrant an increase or decrease in guidance for the rest of 2022. However, if there is an update to guidance, the stock is likely more sensitive to the downside as it is already hitting record highs.
