Coca-Cola (KO) expects to report 1Q12 result on April 17 before the market opens. The Street expects the company to earn $0.89 per share on $10.8 billion in revenue, and guide $13 billion in revenue for Q2.
Last quarter Coca-Cola reported:
- Revenue: $11.04 billion, +5% y/y
- Gross profit margin: 60.1% vs. 59.2% a year ago
- EPS: $0.72 compared to $2.46 a year ago
- Worldwide quarterly volume +3% with US +1% and International +4%
Heading into the earnings, investors can expect to see a 140bps decline in gross margin, which will be in-line with FY2011 gross margin of 61%, due to rising commodities cost. Despite the newly announced global productivity initiative and the expanded Coca-Cola Refreshments integration effort, gross margin is likely to be flat for FY2012.
Other issues that investors should note ahead of earnings:
- Competition from Pepsi (PEP) in the US could be a concern, as PEP is ramping up on couponing activities, particularly on the 24-packs, to attract customers.
- Europe continues to be an overhang for the company due to FX and weak economic growth. However, Spain showed 2% growth in Q4, despite macro headwind and this could indicate that we are close to the bottom.
- Asia is still the most attractive market for KO. Both Japan and China showed positive growth; in particular, volume in China grew 13% in 2011. However, Philippines is still weak with volume declining 9% last year.
For 2012, earnings growth will likely be limited due to weakness in Europe, FX and rising commodities cost.