Coca-Cola Co reported quarterly earnings in line with Wall Street estimates on Tuesday, but revenue fell slightly short, and its shares fell nearly one per cent in premarket trading.
The world's biggest soft-drink maker, with brands such as Sprite, Fanta and Minute Maid, said revenue and profit were hurt by the stronger US dollar, which reduces the value of overseas sales. Coca-Cola gets the majority of its sales from outside the US, so shifts in currency can have a noticeable effect on results.
Net income was $2.31 billion, or 50 cents per share, in the third quarter that ended on September 28, up from $2.22 billion, or 48 cents per share, a year earlier.
Excluding items, earnings were 51 cents per share, in line with analysts' average estimate, according to Thomson Reuters I/B/E/S. Revenue rose 1 per cent to $12.34 billion. Analysts were expecting revenue of $12.41 billion. Coke's shares slid 0.9 per cent to $37.80 in premarket trading.
Still, earnings were in line with analysts' expectations and Coca-Cola shares fell only 27 cents, or 0.7 per cent, to $37.86 on the New York Stock Exchange. In the third quarter that ended on September 28, the strong dollar shaved 5 percentage points of growth from net revenue and 7 points from operating income.
Aside from currency, results in Asia, particularly China, disappointed some analysts, though Sanford Bernstein analyst Ali Dibadj said it was not surprising, given the softening of consumer sentiment and the slowing of an economy that had been a growth engine for multinational companies in recent years.
“China is slowing down a little bit for the long-term benefit of China. As China will settle, there's a little bit of adjustment,” Chief Executive Officer Muhtar Kent told Reuters. "Take a plane -- when it leaves cruising altitude and is going to land, the ride gets rougher. But it will settle."
Kent said he expects settling into a lower growth rate will happen within the next few months.
Sales volume rose 3 per cent in the Pacific region; JP Morgan analyst John Faucher expected 4.5 percent growth.
In addition, European consumers have been hurt by the debt crisis. In the latest quarter, consumers were buying bottled soft drinks to take home, which is less profitable for the company than drinks sold in restaurants.
"Go to Madrid and look at the cafes. There aren't a lot of people sitting around drinking Cokes or coffee or whatever," Gary Fayard, chief financial officer, said on a conference call.
Also, European sales are growing most Eastern and Central Europe where prices are lower, Kent said. This helps volume of sales but hurts revenue.
Third-quarter net income for Coca-Cola was $2.31 billion, or 50 cents per share, up from $2.22 billion, or 48 cents per share, a year earlier.
Excluding items, earnings were 51 cents per share, in line with analysts' average estimate, according to Thomson Reuters I/B/E/S.
Revenue rose 1 percent to $12.34 billion. Analysts were expecting $12.41 billion.
Worldwide sales volume rose 4 percent in the quarter, driven by gains in all regions. Volume rose 1 percent in Europe, 2 percent in North America, 5 percent in Latin America and 11 percent in the Eurasia and Africa region.
Sales volume in the Philippines was flat, due to typhoons. In Japan, soda volume fell 5 percent from the year-earlier period when new products boosted sales. Volume rose 2 percent in China.
Closer to home, North American revenue and profit rose, helped by a recent acquisition and the impact of certain commodities hedges.
Coke is also seeing tougher competition from PepsiCo Inc , which is working hard to improve its North American beverage business. It has increased marketing spending with a focus on core brands like Pepsi-Cola and analysts have been saying that the renewed effort is working.
Through Monday's close, Coke shares were up 9 percent year-to-date, while the Dow Jones U.S. Beverage Index gained 10 percent and the Standard & Poor's 500 index rose 14.5 percent.