Coca-Cola tops estimates with strong international sales
But the positive surprise had much to do with favourable currency exchange rates, thereby muting Wall Street enthusiasm. Shares of the world%26#39;s largest soft drink maker closed up 0.3 per cent.
%26quot;Coke certainly has the wind at its back,%26quot; said Gary Bradshaw, a portfolio manager with Hodges Capital Management in Dallas, citing the international business and currency benefit.
%26quot;But I think folks are stepping back and saying, %26#39;Well, if the dollar%26#39;s weak now, maybe they won%26#39;t do so well when things firm up,%26acirc;%26euro;%26trade;%26acirc;%26euro;%26Acirc;%26Acirc;%26#157; Bradshaw added.
The Atlanta-based company, which gets 78 per cent of its sales abroad, said first-quarter net income rose 19 per cent to $US1.50 billion ($NZ1.92 billion), or 64 cents per share, from $US1.26 billion, or 54 cents per share, a year ago.
Excluding restructuring charges and asset write-downs, Coke earned 67 cents per share. On that basis, the average analyst estimate was 63 cents, according to Reuters Estimates.
Excluding the impact of currency fluctuations, operating income rose 8 per cent.
Operating revenue for the quarter, ended March 28, rose 21 per cent to $US7.38 billion, above the analyst target of $US6.90 billion, according to Reuters Estimates. It would have risen only 12 per cent without the benefit related to translating euros and other strong currencies into dollars.
Bottler acquisitions and higher sales of drink concentrate each contributed five percentage points of revenue growth, while price increases and a product mix featuring more higher-priced items added two points.
Overall unit case volume rose 6 per cent, driven by a 7 per cent gain in markets abroad. North American volume was flat, Coke said, blaming %26quot;challenges in the US economy.%26quot;
North American sales in the food-service and hospitality segment fell 4 per cent as many cash-strapped consumers dine out less due to the faltering economy.
Chief Financial Officer Gary Fayard said on a conference call he expects North American softness to continue through the rest of the year, and that the weakness of the US dollar should boost 2008 operating income by a mid-single-digit percentage rate.
Fayard said Coke was considering reinvesting a portion of the currency benefit into improving productivity and in marketing.
Coke, which also hosted its annual shareholders meeting Wednesday, is a sponsor of the 2008 Beijing Olympic torch relay. That has made the company a target for critics of China%26#39;s human rights record in Tibet.
About 100 pro-Tibet activists demonstrated outside the annual meeting in Wilmington, Delaware, with Tibetan flags and signs that read, %26quot;No Torch in Tibet,%26quot; according to a witness and a spokeswoman for Students for a Free Tibet.
Inside the meeting, simultaneously broadcast over the Internet, the group%26#39;s executive director, Lhadon Tethog, asked Coke%26#39;s outgoing chief executive, Neville Isdell, to pressure the International Olympic Committee to remove Tibet from the torch%26#39;s relay route.
The activists fear that having the Olympic torch move through Tibet could provoke demonstrations by Tibetans and lead to an increased crackdown by Chinese authorities.
Kate Woznow of Students for a Free Tibet said the group is also pressuring Samsung Electronics Co Ltd and Lenovo Group Ltd, the relay%26#39;s other sponsors, and is considering a boycott.
%26quot;It%26#39;ll all be forgotten once the Olympics are done,%26quot; said Bradshaw, whose firm owns about 100,000 shares.
%26quot;I think the Olympics will be a huge benefit to Coke,%26quot; he said, referring to its exposure, especially in emerging markets where Coke%26#39;s opportunity is greatest.
Coke%26#39;s international business, especially in places like China, India, Brazil and Turkey, has grown more important to investors in recent years as growth slows in mature markets like North America.
Morgan Stanley analyst Bill Pecoriello said Coke remains a top pick, adding that with its international exposure, it should continue to exceed expectations despite domestic sluggishness.
In the latest quarter, volume rose 3 per cent in the European Union, 9 per cent in Latin America, 10 per cent in the company%26#39;s Pacific Group and 13 per cent in its Eurasia unit, which includes India, Turkey, Russia and Eastern Europe. Volume fell 1 per cent in Africa.
Coke shares added 21 cents to close at $US61.15 on the New York Stock Exchange.
