Today, the world's largest, most popular soft-drink manufacturer, Coca-Cola (KO +0.74%), was one of several components of the Dow Jones Industrial Average (^DJI +0.11%) to report third-quarter earnings. Alcoa (AA +0.00%) and JPMorgan Chase (JPM +0.32%) kicked off things off last week, reporting results that arguably missed and pounded the consensus estimates, respectively.
This week is one of the busiest for the blue chip index. Other Dow companies reporting today include UnitedHealth (UNH +1.09%), IBM (IBM +0.39%), Intel (INTC 4.43%), and Johnson & Johnson (JNJ +0.72%).
Here's how Coke matched up:
|
Metric |
Actual |
Consensus Estimate |
Beat/(Miss) |
|---|---|---|---|
|
Revenue (billion) |
$12.34 |
$12.41 |
Miss |
|
Earnings per Share |
$0.50 |
$0.51 |
Miss |
Source: The Wall Street Journal.
As you can see, Coke missed on both the top and bottom lines -- revenue missed by roughly $70 million while earnings per share came up $0.01 short.
In no particular order, the three most important takeaways from Coca-Cola's earnings release were:
1. Growth
Don't let the market's reaction to Coke's earnings fool you, as the soda-maker turned in results that evidenced growth in multiple key areas. For the company as a whole, sales volume increased by 4% in the third quarter on a year-over-year basis. The strongest growth was in its international division, where volume grew by 5% compared to growth of only 2% in North America.
According to Coke's CEO, Muhtar Kent: "Despite continued volatility in the worldwide economy ... [w]e have been able to crack the calculus for growth in this environment. We have done this by consistently investing in our system and our brands to ensure that our global portfolio is more relevant and healthier today than it has ever been."
2. Currency pressures
Among the volatility Kent is talking about, the increasingly unpredictable nature of the currency market clearly comes in at or near the top. While third-quarter reported net revenues grew 1%, on a comparable currency basis the figure grew by 6%. According to the company's press release: "Currency represented a 5% headwind on comparable net revenue and a 7% headwind on comparable operating income in the quarter."
Much of the uncertainty can be traced to the actions of central banks. Since the beginning of last month, virtually every country's monetary policymakers have opted to flood their respective economies with liquidity. The European Central Bank kicked things off at the beginning of September by announcing an "unlimited" bond-buying program focused on the debt of troubled European countries. In its wake, central bankers in the United States, China, Japan, Australia, and Brazil all followed suit. The seemingly related moves have even led some to question whether we're in the midst of a currency war.
3. Reorganization
Finally, Coke has decided to reorganize its operating structure into three business units starting Jan. 1: Coca-Cola International, Coca-Cola Americas, and the Bottling Investments Group. The company had previously operated under seven different business segments, broken down roughly by continent as well as bottling and corporate group. While the move will simplify any analysis of the company, it may also result in less transparency about where international growth or contraction is coming from.
Foolish bottom line
Following its misses on both the top and bottom lines, it should be no surprise that shares in Coke are trading lower this morning, down 0.44% two hours into the trading session. At the same time, however, investors in the storied soda company shouldn't be too concerned, as it's one of Warren Buffett's favorite stocks and pays a respectable 2.7% dividend yield.
Meanwhile, shares of Coke's principal competitor, PepsiCo (PEP +2.47%), are up in intraday trading by 0.57%. The well-known proprietor of the Pepsi brand reports earnings tomorrow before the bell.
