Coca-Cola (KO) is up 1% after the company reported better than expected fourth quarter results and guided fiscal 2018 above Wall Street estimates this morning.
Net revenues declined 20% to $7.5 billion for the quarter, impacted by headwinds of 26% from the ongoing refranchising of bottling territories. Organic revenues grew an impressive 6% for the quarter, driven by price/mix growth of 4%, concentrate sales growth of 1% and growth of 1% from one extra day during the quarter.
Total unit case volume was even for the quarter and full year. Developing and emerging markets generated positive volume growth for the second consecutive quarter, including volume growth in Brazil. While volume growth in developed markets overall was even during the quarter, North America volume grew 1%. Notably, transactions are outpacing volume as the company sells smaller packaging for portion control in the developed markets and affordability in emerging markets.
Comparable operating margin expanded more than 530 basis points for the quarter, driven by divestitures of lower-margin bottling businesses and the Company's ongoing productivity efforts. Adjusted EPS was up $0.02 year-over-year to $0.39, $0.01 above estimates.
Coca-Cola's outlook for this year is quite bullish. Coke called for adjusted EPS up 8-10% to $2.06-2.08, above estimates. Management forecasted organic revenue growth of 4% (up from 3% growth last year), with comparable currency neutral operating income up 8-9%, cash from operations of at least $8.5 billion and $1 billion in share repurchases. The company's tax rate is expected to fall 300 bps to 21% from 24%. Management said it has yet to see improved demand stemming from lower taxes in the US yet but higher incomes should lead to higher consumption.
At the Investor Day in November, the company reiterated its long-term targets of mid-single-digit organic revenue growth (+4-6%) and high single-digit comparable currency neutral EPS growth.
On the call, some analysts were skeptical of the company hitting 4% organic sales growth this year. Management said 4% growth would come from a mix of price and volume, the company has momentum after making sequential improvement throughout 2017, executing on initiatives like revenue management, while the global macroeconomic environment improves.
Coca-Cola has a market cap of ~$193 billion and trades at ~22x earnings, a modest premium to the average consumer packaged goods stock that trades closer to 20x.