Coca-Cola (KO +0.02%) might not be the most exciting stock in the world, but the company's recently published first-quarter results are still thrilling.
The beverage giant recorded non-GAAP (adjusted) earnings per share of $0.86 on sales of $12.47 billion in the quarter. The company's per-share profit came in significantly above the average analyst estimate's call for an adjusted profit of $0.82 per share, and revenue topped the average Wall Street target by roughly $230 million.
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Coca-Cola's top-and-bottom-line beats look particularly notable because estimated modeling for a typically slow-growth beverage giant of its size tends to be more accurate relative to results. Even better, the key growth driver for Coca-Cola in the period suggests that its results could be even stronger than a surface-level viewing suggests.
The stock is posting significant gains following the company's Q1 report, with shares up roughly 5.9% as of 1:15 p.m. ET. Shares had been up as much as 6.4% earlier in trading.
Coca-Cola's organic growth crushed expectations
Coca-Cola's revenue grew roughly 12.6% year over year in the first quarter and significantly exceeded Wall Street's expectations. Surprisingly, adjusted organic revenues grew 10% year over year in the quarter.
In addition to developing new products internally, Coca-Cola also leans on acquisitions in order to strengthen its product portfolio. Relatively sluggish performance for carbonated beverages in recent years has caused the company to make acquisitions a key part of its growth strategy, and organic growth for the company's legacy soft drink lineup has been soft in recent years.
With Coca-Cola's organic sales growth coming in at roughly 10% year over year in Q1, there are some big takeaways for investors. For starters, it looks like new products that have been folded into the company through acquisitions have been serving up strong results. As a metric, organic sales growth still includes sales contributions from less recent acquisitions -- and the big first-quarter sales beat is a promising indicator when it comes to evaluating the beverage giant's buyouts.
NYSE: KO
Key Data Points
Delivering another bullish indicator, Coke's organic growth in Q1 and forward guidance for the metric also suggest that the company's legacy beverage lineup is delivering strong results. Global unit case volume increased 3% year over year, and strong pricing power helped the business serve up double-digit revenue growth.
While performance for the company's sparkling drinks segment looked stronger than anticipated, its water, sports, coffee, and tea segment delivered the strongest growth. Volume increased roughly 5% annually, with tea and bottled water products seeing strong momentum. Individual brands including Smartwater and Fairlife delivered particularly strong performance at higher price points, helping to power impressive sales and earnings in the period.
Can Coke keep winning?
Coca-Cola expects organic revenues to increase between 4% and 5% on an annual basis this year, and currency-adjusted net income per share excluding acquisitions and divestitures is projected to be up between 6% and 7%. Notably, the company expects to see a significant currency tailwind, so overall adjusted earnings are actually projected to be up between 8% and 9% compared to last year's level.
With the company guiding for free cash flow (FCF) of roughly $12.2 billion this year, guidance for annual growth of roughly 7% over the $11.4 billion in FCF recorded last year looks solid. Trading at roughly 25 times this year's expected earnings, Coca-Cola trades at somewhat of a premium relative to its growth in recent years. On the other hand, the recent quarterly report suggests that the company is finding some big successes integrating new products into its lineup -- and the beverage giant's massive branding and distribution advantages suggest the long-term outlook remains promising.
