Coca-Cola shares dip on underwhelming results

While chief executive Muhtar Kent has made progress by revamping the company’s bottling system and starting a $3bn (€2.65bn) productivity programme, the maker of Diet Coke and Fanta is continuing to struggle with health-conscious consumers’ shift away from drinking soda.

“The penny beat on the bottom line is perhaps not as encouraging as one might expect, because you’ve got some softness on the top line,” said Vivien Azer, an analyst at Cowen & Co.

“We view soda as the new cigarette, which would result in that category, and Coke in particular, realising structural volume declines from here on out,” the analyst said. Sales volume for Coca-Cola’s sparkling beverages was little changed in the quarter, while non-carbonated beverages gained 7%.

Earnings were 45c a share, excluding some items, the Atlanta-based company said. Analysts estimated 44c, on average. Sales fell 4% to $10.3bn, matching analysts’ average projection.

Coca-Cola is facing currency headwinds abroad and declining soda consumption at home. To combat those trends, the company has introduced smaller bottles and cans that cost more per ounce of liquid than traditional cans and bottles. The efforts have helped somewhat.

Coca-Cola’s operating margin, excluding currency effects and other items, rose to 24.8% from 23.4%. Still, net income fell 4.8% to $1.48bn, or 34c a share.

Mr Kent has been divesting bottling operations, which lets Coca-Cola focus on the more profitable business of selling concentrates and syrups to the companies that manufacture, package and distribute the drinks.

Coca-Cola announced more progress yesterday, saying it is selling territory to three existing bottlers and one newly formed bottler, led by former National Basketball Association player Ulysses Junior Bridgeman.

To date, the beverage giant has transferred or signed agreements for about two-thirds of company-owned bottling systems.