No fizz in Coca-Cola’s shares
Coca-Cola shares plunged the most in more than 10 years after the company forecast slowing sales in 2019, hit by a stronger dollar in the face of rising global economic uncertainty and lower demand for its fizzy drinks in some markets.
The shares fell at one stage by over 7%, also pressured by a broader retail rout sparked by data that showed a surprise drop in US retails sales in December.
A stronger dollar is an added headache for companies like Coca-Cola and Pepsi Co that are already wrestling with rising freight and commodity costs even as they spend heavily on noncarbonated drinks to attract health-conscious consumers.
Coca-Cola, which gets nearly two-thirds of its revenue from international markets, cited the Middle East, Argentina, and Turkey as particularly weak and weighing on sales in the first half of 2019.
“We want to be prudent in our outlook guidance, given the macro environment,” said chief executive James Quincey.
Consumers are under more pressure as we head into the new year.
To counter rising costs, Coca-Cola has raised prices of its beverages.
But that has come at the expense of demand: Volumes fell 1% in North America in the fourth quarter, while Latin America was down 2%.
Coca-Cola forecast full-year profit to be between $2.06 and $2.10 per share, far below the average estimate of $2.23.
The company also said it expects core 2019 revenue growth of about 4%, down from 5% in 2018.
“The company seems to be playing it very conservatively on currency and taxes, but still a disappointment versus expectations,” said Bernstein analyst Ali Dibadj.
Excluding one-time items, Coca-Cola said it earned 43c per share, in line with expectations.
Revenue fell 6% to $7.1bn (€6.28bn) in the fourth quarter, hurt by refranchising of its low-margin bottling operations.
Analysts had estimated sales of $7.03bn. Coca-Cola’s fourth-quarter topline was decent, but there are concerns on the composition, with volumes being weak, said Jefferies analyst Kevin Grundy, adding that the quarter was “messy”.
Shares of British soft drink bottler Coca-Cola HBC fell 4% earlier in the day, after it warned of higher finance costs and weak consumer spending in several of its markets this year.
PepsiCo will report results today.
