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Beverage company Coca-Cola (NYSE:KO) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 3.3% year on year to $12.36 billion. It made a non-GAAP profit of $0.84 per share, improving from its profit of $0.78 per share in the same quarter last year.
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Coca-Cola (KO) Q2 CY2024 Highlights:
- Revenue: $12.36 billion vs analyst estimates of $11.75 billion (5.2% beat)
- EPS (non-GAAP): $0.84 vs analyst estimates of $0.81 (4.3% beat)
- Full year guidance raised for organic revenue growth and EPS growth
- Gross Margin (GAAP): 61.1%, up from 59% in the same quarter last year
- Free Cash Flow of $3.32 billion, up from $158 million in the previous quarter
- Organic Revenue rose 15% year on year (11% in the same quarter last year)
- Sales Volumes rose 2% year on year (0% in the same quarter last year)
- Market Capitalization: $279 billion
Beverages and AlcoholThese companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.
Sales GrowthCoca-Cola is one of the most widely recognized consumer staples companies in the world. Its influence over consumers gives it extremely high negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don't have).
As you can see below, the company's annualized revenue growth rate of 8.5% over the last three years was decent as consumers bought more of its products.
This quarter, Coca-Cola reported decent year-on-year revenue growth of 3.3%, and its $12.36 billion in revenue topped Wall Street's estimates by 5.2%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.
Volume GrowthRevenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
To analyze whether Coca-Cola generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.
Over the last two years, Coca-Cola's average quarterly volume growth was a healthy 1.9%. Even with this good performance, we can see that most of the company's gains have come from price increases by looking at its 12.9% average organic revenue growth. The ability to sell more products while raising prices indicates that Coca-Cola enjoys some degree of inelastic demand.
In Coca-Cola's Q2 2024, sales volumes jumped 2% year on year.
Key Takeaways from Coca-Cola's Q2 Results We were impressed by how Coca-Cola beat analysts' organic revenue growth expectations this quarter, leading to revenue exceeding estimates. That the company raised full year guidance is another positive. Zooming out, we think this was a great quarter that shareholders will appreciate. The stock traded up 1.3% to $65.65 immediately after reporting.
