Coca-Cola Profit Meets View Despite Sluggish Sales, Expands Cost Cutting

(RTTNews) - Beverages giant Coca-Cola Co. (KO) reported Tuesday a profit for the third quarter that decreased 14 percent from last year, despite higher worldwide volumes, reflecting a revenue drop.

Adjusted earnings per share matched analysts' expectations, even as quarterly revenues missed their estimates.

Following the announcement, the company's shares are trading more than five percent lower in early deals.

"Earlier this year, we announced five strategic priorities to restore momentum and reinvigorate long-term sustainable growth. While we have begun to see early signs of progress, we recognize that we need to increase the scope and pace of change as we continue to face a challenging macroeconomic environment," Chairman and CEO Muhtar Kent said in a statement.

The Atlanta, Georgia-based company reported net income of $2.11 billion or $0.48 per share for the third quarter, lower than $2.45 billion or $0.54 per share in the prior-year quarter.

Excluding charges and gains, adjusted net income for the quarter was $2.35 billion or $0.53 per share, compared to $2.38 billion or $0.53 per share in the year-ago quarter.

On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $0.53 per share for the quarter. Analysts' estimates typically exclude special items.

Net operating revenues for the quarter edged down t0 $11.98 billion from $12.03 billion in the same quarter last year, and missed eighteen Wall Street analysts' consensus estimate of $12.12 billion. Excluding the impact of structural changes, comparable currency neutral net revenues grew 1 percent.

Eurasia & Africa net operating revenues grew 6 percent, Europe revenues edged up 1 percent and Asia Pacific revenues increased 5 percent from last year. Meanwhile, Latin American revenues declined 4 percent and North American revenues were down 2 percent from last year. Bottling investments revenues remained flat with last year.

The company noted that worldwide volumes grew 1 percent, reflecting volume growth in Latin America, Asia Pacific as well as Eurasia and Africa, partially offset by a decline in Europe and North America. Coca-Cola International volume was up 1 percent.

The company said worldwide sparkling beverages volume remained flat with last year. Worldwide brand Coca-Cola volume was even, while Sprite and Fanta both grew 1 percent.

Worldwide still beverage volume grew 2 percent, with tea contributing 4 percent volume growth and both water and energy drinks volume growing 7 percent.

The company reported global volume and value share gains in nonalcoholic ready-to-drink beverages as it continues to leverage the strongest portfolio of brands in the industry.

The company noted that it is expanding is cost cutting measure to $3 billion in annualized savings by 2019, including plans to refranchise the majority of its North American bottling territories by the end of 2017.

Looking ahead, the company said it expects to be below its long-term earnings per share growth target for 2014. Based on the current outlook, it also does not expect comparable currency neutral earnings per share growth in 2015 to be significantly different from 2014.

"While these actions will take time to implement, we are confident that they will position The Coca-Cola Company to continue delivering sustainable value to our shareowners as we work toward our 2020 Vision," Kent added.

Separately, the company announced actions to reinvigorate growth. It plans to maintain its long-term high single-digit earnings per share growth target while adjusting its net revenue target to mid single-digit growth and replacing its operating income metric with profit before tax.

The company will streamline and simplify its operating model to speed decision making and enhance local market focus. It will also refocus on its core business model of building the world's greatest beverage brands and leading an unmatched global system of strong local bottling partners.

KO closed Monday's regular trading session at $43.29, up $0.54 on a volume of 17.64 million shares. In the past 52-week period, the stock has been trading in a range of $36.83 to $44.87.