Preview of Coca-Cola (NYSE:KO) Q3 earnings


The Coca-Cola Company (NYSE:KO) is set to announce third quarter earnings on the 21st of October. The company’s stock price has increased over the term that went far and above the S&P 500 Index. However, this is lesser than the growth, PepsiCo (NYSE:PEP) has seen with its snack business that makes more than about 60% of its valuation.

Considering Coca-Cola (NYSE:KO) is only a maker of drinks, the company may witness somewhat of a decline. The company did try to get a hold of this declining demand by promoting smaller packages with higher margins in order to increase the sales of its drinks in North America which will be shown in this year’s earnings.

The volume growth of Coca-Cola (NYSE:KO) in emerging countries may decrease due to the sugar tax that was imposed in Mexico which is the biggest consumer of Coca-Cola’s (NYSE:KO) products. Analysts estimate a $41.86 price for the company which is around 3% lower than the market price. In the last three months, the stock price of the company increased by nearly 2.7%

Even with the lesser demand of flavored sodas this quarter, Coca-Cola (NYSE:KO) and other sodas like Fanta saw increases in volume due to the FIFA World Cup investment. More growth is expected in the domestic market with Coca-Cola’s (NYSE:KO) Share-a-Coke campaign that seemed like a huge success in the U.S.

Last year the company’s drink, Coca-Cola (NYSE:KO), made around revenues of $11 billion out of which one-third earning were from the United States only. The volumes of the drink are set to increase marginally again in this quarter with positive growth for the whole year.

The company announced in February that it was to save $1 billion increment in productivity till 2016. This savings will in turn be directed towards the company’s media investments. Coca-Cola (NYSE:KO) is bound to save around $550-$660 million in the current year.

The company’s Coca-Cola (NYSE:KO) life was a huge success in Argentina as well as Chile. The stevia in the drink makes for positive perception in the mind of consumers unlike certain artificial sweeteners. This won’t have a major impact on Q3 earnings though, with its launch only in key markets.

The sales in Latin America for the company dropped by about 9% in the last quarter due to the slow sale volumes in Mexico as well as Brazil. It made about 20% of net volumes in the previous year. In Q2 of the company, volumes in Mexico dropped 3% and are set to decline further this quarter.

The economies of Russia and Brazil which are declining to quite an extent may also impact the company’s financials. The inflation in these economies may boost revenues but lower the volumes in both countries as consumers cut expenses.

RTD tea made around 4% of net volumes for the U.S. last year and CSDs made 43%. The company’s RTD volumes increased by 4% throughout the world in its second quarter and may continue to rise in this quarter as well.