Coca-Cola Q1 Profit Down, But Tops View

(RTTNews) - Coca-Cola Co. (KO) reported a profit for the first-quarter of 2016 that declined 5 percent from the prior year, while quarterly operating revenues decreased 4%. But, adjusted earnings per share topped analysts' expectations.

In the pre-Market trade, KO is currently trading at $45.67, down $0.93 or 2.00 percent.

Net income attributable to shareowners of the company for the quarter decreased 5 percent to $1.48 billion from the prior year's $1.56 billion, with earnings per share declining to $0.34 from $0.35 last year.

Comparable earnings for the quarter were $1.99 billion, or $0.45 per share, down from $2.10 billion, or $0.48 per share in the prior year. Analysts polled by Thomson Reuters expected the company to report earnings of $0.44 per share for the quarter. Analysts' estimates typically exclude special items.

Items impacting comparability decreased reported earnings per share by a net $0.11 and were primarily related to noncash charges related to refranchising certain territories in North America and costs associated with previously announced productivity, integration and restructuring initiatives.

Net operating revenues dropped 4 percent $10.28 billion from $10.71 billion in the previous year. Wall Street expected revenues of $10.29 billion.

Organic revenue growth of 2% in the quarter was driven by concentrate sales growth and 1 point of positive price/mix. Concentrate sales growth was negatively impacted by one less day in the quarter. After adjusting for the one less day in the quarter, concentrate sales were in line with unit case sales. Price/mix was driven by solid underlying pricing partially offset by 1 point of segment and geographic mix. Acquisitions, divestitures and structural items primarily include the impact of refranchised territories, as well as the net impact of the brand transfer agreement associated with the closing of the transaction with Monster Beverage Corporation in 2015 and the expanded distribution of Monster's beverage products.

First quarter cash from operations was $604 million, negatively impacted by contributions to U.S. pension plans of $471 million, fluctuations in foreign currency exchange rates, and one less day in the quarter.

For the second quarter of 2016, the company estimates that based on the current spot rates, currency will be a 2 to 3 point headwind on comparable net revenues and an 11 point headwind on comparable income before taxes, including the impact of hedged position.

The company continues to expect organic revenue to be up 4% to 5% in 2016, in line with our long-term target. The net impact of acquisitions, divestitures and structural items on comparable net revenues is expected to be a 4 to 5 point headwind and based on the current spot rates, currency is expected to be a 2 to 3 point headwind, including the impact of hedged positions for the full year.

The company expects comparable currency neutral income before taxes (structurally adjusted) to grow 6% to 8% in 2016, in line with our long-term target, as strong operating profit growth is expected to be partially offset by increased interest expense. The net impact of structural items is expected to be a 3 to 4 point headwind and based on the current spot rates, currency is expected to be an 8 to 9 point headwind, including the impact of hedged positions for the full year.

The Company expects full-year comparable currency neutral earnings per share growth to be 4% to 6% including the impact of 3 to 4 points of structural headwind, primarily due to refranchising, on comparable currency neutral income before taxes. Based on the current spot rates, currency is expected to be an 8 to 9 point headwind, including the impact of hedged positions for the full year.

Wall Street currently is looking for fiscal year 2016 earnings of $1.95 per share on annual revenues of $42.40 billion.

The company targets full-year 2016 net share repurchases of $2.0 billion to $2.5 billion.