Coca-Cola (KO) CEO James Quincey says inflationary pressures are fading.
“Our price levels and input inflation cost levels are normalizing over the course of the year,” he told Yahoo Finance on Tuesday after the company released first-quarter results.
Coca-Cola reported sales of $11.3 billion, beating Wall Street expectations for $10.96 billion, and earnings per share of $0.72, beating expectations of $0.70.
However, unit sales growth was only 1% year-on-year, despite a 13% increase in prices across the segment.
The company expects organic revenue growth to range from 8% to 9%, partly due to expected strong results and partly due to “heavy inflation” in some countries such as Argentina and Nigeria. updated.
“There are a number of countries that represent a relatively small share of the business in volume terms, but rising inflation levels are driving up both their currencies and neutral revenues,” Quincey explained.
Additionally, Coca-Cola sees inflation slowing, including in commodity prices such as corn syrup, sugar and aluminum cans.
Coca-Cola’s stock price has fallen 3% over the past year, while rival PepsiCo’s (PEP) stock has fallen more than 9%.
Although goods are still much more expensive than before the pandemic, most consumers have been able to cope with the costs.
“The situation for U.S. consumers is improving in the sense that wages are increasing relative to inflation and purchasing power is stabilizing,” Quincey said. “Low-income consumers are under a little more pressure because they are looking for value more explicitly.”
Low-income consumers account for about 20% of Coca-Cola’s sales in the U.S., said Andrea Teixeira, an analyst at JPMorgan.
Americans are still willing to spend money on experiences like dinner, movies, and theater, but some have made a slight shift toward entertaining at home.
Quincey said the rebound is “partly due to … lower-income consumers,” but it’s not as big of a difference as has been seen during the coronavirus pandemic.
Growth was driven by product innovations for the eponymous Coca-Cola brand, including the adoption of a variety of package sizes, including mini cans, in the United States.
Here’s how Coca-Cola reported compared to Wall Street estimates, according to Bloomberg consensus data.
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Revenue: $11.3 billion vs. $10.96 billion
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Adjusted earnings per share: $0.72 vs. $0.70
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Increase in unit case volume: 1% vs. 1.27%
Analysts expect the good times to continue for the beverage giant.
“Margin profits have been appropriately reinvested (SG&A + 74 basis points), a positive sign that outperformance may continue,” Jefferies analyst Kaumil Gajrawala said in a note to clients.
“Operating performance exceeded our bullish expectations, and with a top stock for the quarter and a stronger-than-expected start to the year in terms of 2024 sales and gross margins, investors believe momentum will continue.” “We believe this gives us further confidence that Coca-Cola is a revenue driver,” Teixeira wrote.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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