The Coca-Cola Company (KO 47.10, +0.64, +1.38%) hit a nine-month high after the
company beat estimates on the top and bottom line for the sixth quarter in a
Third quarter revenue declined 9% to $8.2 bln due to a 13-point headwind from the refranchising of company-owned bottling operations.
More importantly, organic revenue growth accelerated to 6%, driven by concentrate sales growth of 4%, which benefited from the timing of shipments and from price/mix growth of 2%. Organic sales grew 5% in the first and second quarters and 4% in the third quarter of last year.
Unit case volume grew 2% in the third quarter, led by Trademark Coca-Cola. The company reported that it continued to gain value share in total nonalcoholic ready-to-drink (NARTD) beverages, particularly in the North America and Asia Pacific regions. The sparkling soft drinks category and the water, enhanced water, and sports drinks category both reported growth while the juice, dairy, and plant-based beverages category saw some impact from a challenging macroeconomic environment in the Middle East and Africa as well as package downsizing in North America, and the tea and coffee category also reported a decline overall tied to the decline of the company’s local tea brand in Turkey and to impact from Nestea, resulting from the terms of the dissolution of the company’s former Beverage Partners Worldwide joint venture.
Comparable operating margin improved 575 basis points, driven by divestitures of lower-margin bottling operations and the company's ongoing productivity efforts. Adjusted earnings grew 14% to $0.58/share.
During the quarter, the company entered the coffee market by purchasing London-based Costa Limited for $5.1 bln. The company also previously announced a relationship with BODYAMROUR sports drinks, Australian kombucha maker MOJO, and French fruit-flavored beverage maker Tropico.
Coca-Cola reaffirmed its outlook for fiscal 2018 adjusted EPS up 8-10% with organic revenue growth of at least 4%.
Coca-Cola's superior growth profile results in a premium valuation relative to consumer packaged goods peers. With a $200 bln valuation, Coca-Cola trades at ~22.5x EPS versus the average CPG company, which trades closer to 19x.
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