It will be decision time for some Coca-Cola (KO) investors (not named Warren Buffett) following the company’s fourth quarter earnings release on Thursday. While the quarter was generally fine, there were a few red flags that could give investors pause as they look into the balance of 2020.
Net sales: $9.1 billion vs. estimates for $8.88 billion
Diluted EPS: $0.47 vs. $0.44
The good: sales and profits up in all divisions except Europe/Africa
The not so good: flat volume in North America; profit outlook in line with consensus
First move in the stock: +1.2% pre-market
Considering it’s size and tough year ago financial comparisons, Coca-Cola’s fourth quarter was rather impressive. The company grew sales in all geographic regions except for Europe, Middle East and Africa. Sales growth was led by Latin America (+26%) and Coke’s global ventures business (+11%). Operating profits also rose in all geographic segments except for Europe, Middle East and Africa. The gains reflect efforts under CEO James Quincey to better manage costs and push through prices increase on various products.
But, it won’t be a completely clean earnings day for Coke — which is reflected in the first move in the stock despite a strong earnings beat. First, Coke’s volume in the competitive North America market was unchanged year-over-year and primarily led by Coke Zero. That would suggest weakness in other areas of the portfolio, perhaps a function of too many price increases and a picked up pace of advertising by rival PepsiCo.
Secondarily, Coke’s organic revenue growth outlook for 2020 of 5% was shy of whisper numbers — our work suggests investors were betting on at least a 6% call out.
And finally, Coke’s initial earnings outlook for 2020 of $2.25 a share was only in line with consensus. That could be the typically conservative Coke just staying true to its DNA. Investors may not read it that way in the beginning, however, due to headlines of global businesses getting hit by the coronavirus and still dealing with sluggish economic growth.
All in all, a decent earnings day for Coke. Not a perfect one.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
Read the latest financial and business news from Yahoo Finance
Microsoft CEO Satya Nadella on the future of retail
4 major concerns investors have about the stock market in 2020
Trump's tax plan will hurt restaurants again in 2020: Dunkin' chair
Watch: Target is Yahoo Finance’s ‘Company of the Year’
Beyond Meat founder: things are going very well with McDonald’s
Starbucks CEO on what China has in store for the coffee giant
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.