Coca-Cola revenues miss estimates as North America growth stalls


Coca-Cola (KO -2.6%) opens sharply lower after Q2 revenues fell Y/Y and finished below expectations as North America sales declined for the second straight quarter.

Q2 global unit case volume grew 3% Y/Y but was flat in North America, despite increased marketing around the World Cup and the launch of the "Share a Coke" campaign; J.P. Morgan analysts had expected volumes to gain 1%-2% in North America, which accounted for 45% of total Q2 revenue.

On the bright side, gross margin widened to 61.7% as input costs declined 3.4% from a year earlier.

KO also says adjusted earnings would be hurt by $0.02 in H2 due to the restructuring of its juice operations in Russia and the separation of its Brazilian bottling operations last year.

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Comments (17)
  • wyostocks
    , contributor
    Comments (9115) | Send Message
     
    Who drinks Coke or Pepsi anymore?

     

    My kids and their friends won't touch the stuff, their kids are not allowed to drink it, and oldies like me don't drink it anymore.
    22 Jul 2014, 10:01 AM Reply Like
  • chopchop0
    , contributor
    Comments (5217) | Send Message
     
    yup..... secular decline in soft drinks consumption
    22 Jul 2014, 10:07 AM Reply Like
  • ls1gto
    , contributor
    Comments (264) | Send Message
     
    Plenty of people still do. Also, there is more to KO than just Coke. They also have juice and bottled water lines, for instance, which have been growing in popularity. I myself drink Dasani, Simply Orange and their teas.
    22 Jul 2014, 10:18 AM Reply Like
  • ConservativeOutperformer
    , contributor
    Comments (728) | Send Message
     
    That's true gto, but what are the margins on Dasani, tea and Simply Orange? Are they as high as Coke? How much did those brands cost to buy (or develop) and what is the competitive advantage there as opposed to other brands? Is there a secret recipe? How large are Coke sales compared to the other portions of the business?

     

    The answer to those questions are why KO hasn't moved in 2 years, and why the stock probably won't advance much going forward. The only way this changes is with a huge acquisition, and that's a very risky proposition as a common shareholder.

     

    And for all the 'Warren Buffett holds it' guys.... This isn't IBM. KO can't 're-invent' themselves one day. It holds a secret recipe for a substance that they sell all over the world using a vast network. They've added other brands over the years. If their most profitable product in their largest market continues to decline, the valuation needs to be seriously re-considered. As wyostocks asked, who drinks Coke or Pepsi anymore?

     

    At least with PEP you get a huge food business......... The guy below is comparing these businesses to cigarettes and saying they still pump out earnings and dividends..... That's true. But how do those earnings and dividends compare to what was being pumped out 30 years ago? What is the business valuation for the tobacco businesses versus 30 years ago?

     

    Good luck!
    22 Jul 2014, 02:22 PM Reply Like
  • Brian Sanders
    , contributor
    Comments (1424) | Send Message
     
    I drink Coke almost everyday of my life. I know plenty of people that do.
    22 Jul 2014, 11:00 PM Reply Like
  • wyostocks
    , contributor
    Comments (9115) | Send Message
     
    Brian

     

    Do you smoke also?
    23 Jul 2014, 07:39 AM Reply Like
  • Brian Sanders
    , contributor
    Comments (1424) | Send Message
     
    nope. i'm not overweight or a diabetic either.

     

    contrary to popular belief, you can live a very healthy life even if soda is part of the routine. it's just sugar.
    23 Jul 2014, 12:20 PM Reply Like
  • Lakeaffect
    , contributor
    Comments (1466) | Send Message
     
    This is no big deal at all. KO can hide any deterioration in earnings and support it's pe by using ZIRP money to buy back it's shares. It's what all the "in the know" big companies do these days. ZIRP supports the stock market while obscuring the fact that the American economy is withering away.
    22 Jul 2014, 10:23 AM Reply Like
  • wyostocks
    , contributor
    Comments (9115) | Send Message
     
    Lake.....

     

    I haven't looked at the BS of KO, but corporate debt has skyrocketed for all those firms buying back shares (IBM is a good example) to boost EPS. When rates go higher the worm will turn.

     

    Meanwhile thanks to ZIRP the average Joe has no money to buy crappy sodas anyway.
    22 Jul 2014, 11:15 AM Reply Like
  • berloe
    , contributor
    Comments (2200) | Send Message
     
    It's true less people drink soda; and less people smoke cigarettes, Still, these companies pump out earnings and increasing dividends.
    22 Jul 2014, 11:11 AM Reply Like
  • civ-e
    , contributor
    Comments (690) | Send Message
     
    what % of total revenue is from soft drinks for KO?
    22 Jul 2014, 12:02 PM Reply Like
  • chopchop0
    , contributor
    Comments (5217) | Send Message
     
    per wikipedia, "coke" brand soft drinks account for 78% of revenue. whatever it is, I am sure it is significant. Unlike PEP, KO has no food portfolio to fall back on
    22 Jul 2014, 12:19 PM Reply Like
  • civ-e
    , contributor
    Comments (690) | Send Message
     
    WOW, 78%, that has got me nervous about this investment. Oh well that's my own fault for not looking it up b4 buying. I had always thought a competent management (which everyone says they have) could offset the decline in soft drink with other beverages, but at 78% it's going to be a looong way to reposition itself.
    22 Jul 2014, 12:36 PM Reply Like
  • magi48
    , contributor
    Comments (429) | Send Message
     
    This no surprise, except to the bankers. But where will the bottom be?
    22 Jul 2014, 12:28 PM Reply Like
  • sethmcs
    , contributor
    Comments (3565) | Send Message
     
    Maybe Coke could be re-branded as paint remover.
    22 Jul 2014, 03:32 PM Reply Like
  • The_Hammer
    , contributor
    Comments (5093) | Send Message
     
    Gut rot finally being phased out. the no brainer is starting to see chinks in the armor.
    22 Jul 2014, 09:25 PM Reply Like
  • Ex-Coke employee
    , contributor
    Comments (8) | Send Message
     
    Management is in denial that they can sustain their growth without trimming costs...volumes up, revenue down. Do you know how Coke does it? Coca-Cola’s growth plan seems to be to overwork their employees to make more soda, for a market that is consuming less and less each day. As a former employee, I can say that at Coke you are constantly under pressure to do more with less. The company is antiquated and there is an extremely high rate of turnover and low morale among employees. Sell, sell, sell. Don't just hold Coke because Buffett holds it as no one is infallible. Buy Pepsi, at least they have quaker oats, doritoes, etc. Coke's main source of revenue is basically carbonated sugar water...loaded with acidity that will rot/stain your teeth. As a millennial, I don't know anyone that drinks a can of coke daily. People in my age group drink a can or bottle of coke maybe once a month if that.
    23 Jul 2014, 02:17 AM Reply Like
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