Coca-Cola Q1 Profit Misses View, But Revenues Top

(RTTNews) - The Coca-Cola Company (KO) reported a profit for the first-quarter of 2017 that declined 20 percent from the prior year. Net revenues declined 11%, reflecting unfavorable impacts from structural changes of 10% and foreign currency of 1%. Organic revenues were even, which included the impact of two fewer days in the reporting calendar and the shift of the Easter holiday.

Adjusted earnings per share missed analysts' expectations, while quarterly revenues topped their estimates.

The company remains on track to deliver its underlying revenue and profit targets for the full year. It is expanding its existing $3 billion productivity and reinvestment program to capture an incremental $800 million in annualized savings by 2019.

In the Tuesday's pre-market trade, KO is trading at $43.50, up $0.22 or 0.51 percent. For 2017, the company still expects approximately 3% growth in organic revenues; 7% to 8% growth in comparable currency neutral income before income taxes driven by strong operating performance partially offset by the impact of an increasing interest rate environment.

The company now expects Comparable earnings per share for 2017 to decline 1% to 3% from $1.91 in 2016. Previously, the company expected its comparable earnings per share to decline 1% to 4% from $1.91 in 2016.

Muhtar Kent, Chairman and Chief Executive Officer of The Coca-Cola Company, said, "... As anticipated, revenues in the quarter were adversely impacted by two fewer days and the shift of the Easter holiday. Most importantly, we continue to execute against the long-term strategic transformation plan for the Company - a plan that I am confident will deliver even greater shareowner and stakeholder value in the years to come..."Next week I will proudly hand over the CEO reins to James Quincey with full confidence that he will complete the Company's transformation and lead our aggressive growth agenda."

Net income attributable to shareowners of the company for the first-quarter dropped 20 percent to $1.18 billion from the prior year's $1.48 billion, with earnings per share declining to $0.27 from $0.34 last year.

Comparable net income attributable to shareowners of the company for the first-quarter was $1.88 billion or $0.43 per share, compared to $1.99 billion or $0.45 per share in the prior year. Analysts polled by Thomson Reuters expected the company to report earnings of $0.44 per share for the first-quarter. Analysts' estimates typically exclude special items.

Net Operating revenues for the quarter declined 11% to $9.12 billion from last year's $10.28 billion, impacted by a headwind from acquisitions, divestitures, and structural items of 10% related to the ongoing refranchising of bottling territories and a foreign currency exchange headwind of 1%.

Organic revenues were even - the result of 3% price/mix growth and a 3% decline in concentrate sales. The two fewer days in the quarter accounted for an approximate 2 point drag on organic revenue growth. The timing of concentrate shipments and the shift of the Easter holiday into the second quarter also put negative pressure on the results. Core business organic revenues were even, and core business price/mix growth was 3%.

Comparable net Operating revenues were $9.13 billion, down from $10.33 billion last year. Analysts expected revenue of $8.89 billion for the quarter. Price/mix growth of 3% was primarily driven by positive operational pricing and mix in all operating segments. Geographic or segment mix did not have a significant impact on price/mix.

Total unit case volume was even, which included less than a half point of growth from acquired brands. Unit case volume performance was significantly impacted by the macroeconomic conditions in select Latin American markets along with the shift of the Easter holiday into the second quarter. Brazil and Venezuela accounted for over a 1 point drag on consolidated unit case volume growth. From a market segmentation perspective, our developed markets continued to outperform the consolidated results with 1% unit case volume growth.

The company is expanding its current productivity and reinvestment program, with planned initiatives that are expected to generate an incremental $800 million in annualized savings by 2019. This brings the total annualized savings target of our six-year program to $3.8 billion.

It expects to generate these additional savings through opportunities across our entire spend base - supply chain, marketing expenditures, and from the new operating model that was announced at the CAGNY Conference earlier this year. The majority of these additional savings are expected to be achieved in 2018 and 2019. The expected productivity savings associated with 2017 were included in previously provided guidance.