Coke beats Street, sees signs U.S. economy improving

Tue Apr 17, 2012 10:38am EDT

Bottles of Coca-Cola are seen in a warehouse at the Swire Coca-Cola facility in Draper, Utah March 9, 2011. REUTERS/George Frey

Bottles of Coca-Cola are seen in a warehouse at the Swire Coca-Cola facility in Draper, Utah March 9, 2011.

Credit: Reuters/George Frey

Related Topics

(Reuters) - Coca-Cola Co (KO.N) posted higher-than-expected quarterly results after the world's largest soft drink maker sold more beverages, even in developed markets with economic challenges, fueling hopes that conditions are improving.

The maker of Sprite, Minute Maid orange juice and vitaminwater, which does business in more than 200 countries, saw volume rise 3 percent in Germany and Japan, 6 percent in Spain and 1 percent in the United States, in a sign that consumers may be opening their wallets again after economic uncertainty curbed demand.

"Despite its struggle with a sustained period of relative high unemployment, we are pleased to see some early signs of a slowly improving macroeconomic environment," Coke Chief Executive Muhtar Kent said about the United States.

At the same time, performance in China may weaken as that country's economic growth slows from the meteoric rates seen in recent years.

"As we move through 2012, we anticipate that our business in China may not be immune to this cooling economy and therefore, we may also see some of our volume results in China moderate to some extent," Kent said. He added that results in Brazil should remain steady as that country's economy recovers.

Emerging markets are still what drives Coca-Cola's growth, said Sanford Bernstein analyst Ali Dibadj, but he said the pickup in mature markets was a good sign.

"That's an interesting message for us, not just for Coke but more broadly for consumer packaged goods," Dibadj said. "I don't think the U.S. is back to what it used to be, in terms of growth, but this would suggest that things are getting a little bit better."

Coke shares were up $1.45, or 2 percent, at $73.89 in morning trade on the New York Stock Exchange.

COMMODITIES, CALENDAR HURT

Coca-Cola's first-quarter net profit was $2.05 billion, or 89 cents per share, up from $1.90 billion, or 82 cents per share, a year earlier.

Revenue rose 6 percent to $11.14 billion, helped by a 5 percent increase in overall volume and a 3 percent increase in prices and mix of products sold.

Analysts on average expected earnings of 87 cents per share on revenue of $10.82 billion, according to Thomson Reuters I/B/E/S.

"The profit growth was quite strong considering the impact of one less selling day and the toughest commodity lap of the year," said Consumer Edge Research analyst Bill Pecoriello, referring to how much higher prices were for raw materials like packaging and sweetener than in the year-earlier quarter.

Coca-Cola also said it was on track with a productivity program aiming to save $550 million to $650 million a year by the end of 2015.

(Reporting by Martinne Geller in New York; Editing by Gerald E. McCormick, Lisa Von Ahn, Dave Zimmerman)

FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article