Coca-Cola earnings preview: Watch for some pop with organic sales, M&A, buybacks, and RTD alcohol

Coca-Cola Company (NYSE:KO) will report earnings on October 23. Analysts expect the Atlanta-based beverage giant to report revenue of $11.6 billion and EPS of $0.75. Organic revenue is forecast to be up 6.1% year-over-year, led by double-digit growth in Europe, the Middle East & Africa, and Latin America regions. For the North America business, organic revenue is expected to be up 3.3% for the North America business.

Hargreaves Lansdown analyst Aarin Chiekrie noted that investors expect to hear that some of the Q2 momentum spilled into Q3. “Back in July, second-quarter results blew the lid off market expectations, leading management to upgrade full-year guidance for the second time this year. Higher prices, increased volumes, and helpful shipment timings saw revenue and operating profits both move higher at double-digit rates,” he highlighted. The trick for Coca-Cola (KO) is that it is rolling into some tough comparable periods for the second half of the year. With cash generation strong, the focus from investors may be on increased share buybacks and potentially even new acquisitions in the near to medium term.

UBS Peter Grom said Coca-Cola’s (KO) outperformance in comparison to other beverage names, coupled with concerns that organic revenue growth could be challenging in China, Mexico, and the Middle East, raises the bar for the report. “Even though KO has a history of raising both organic revenue and comparable currency-neutral EPS growth post 3Q EPS, and we had previously anticipated an increase next week, we now believe that the volatile external environment has called into question whether the company will follow this pattern,” he warned.

On the earnings call, investors could hear about new initiatives. Management already tipped out its plans to phase out Coca-Cola Spiced to introduce an “exciting new flavor” in 2025. Coca-Cola (KO) also recently announced that it is partnering with Bacardi Limited to debut a ready-to-drink pre-mixed cocktail. The BACARDÍ Mixed with Coca-Cola RTD product will be available in several markets around the world, with the initial launch planned for select European markets and Mexico in 2025. BACARDÍ Mixed with Coca-Cola RTD packaging will feature two of the world’s most recognizable global trademarks. Of course, Coca-Cola (KO) is traditionally known for its non-alcoholic beverages, but has been strategically expanding into the alcohol market recently. The company’s approach focuses on the ready-to-drink formats of hard seltzers, hard alternatives, and pre-mixed cocktails. The first key development in Coca-Cola’s (KO) alcohol push was launching Lemon-Dou in Japan in 2018, marking the company’s first entry into alcohol beverages since the 1970s. The Atlanta-based company also introduced Topo Chico Hard Seltzer in over 20 markets, and partnered with Jack Daniel’s to create a pre-mixed Jack Daniel’s & Coca-Cola cocktail, set to launch first in Mexico. Coca-Cola (KO) also developed Simply Spiked Lemonade and Fresca Mixed for the U.S. market.

On Wall Street, Coca-Cola (KO) is viewed bullishly, with 17 Buy-equivalent ratings stacking up against just 7 Hold-equivalent ratings, and 1 Sell-equivalent rating. The vibe on KO is more cautious on Seeking Alpha, as the last five articles on Coca-Cola (KO) were from analysts that set a Hold rating on the beverage stock.

Shares of Coca-Cola (KO) are up 19% on a year-to-date basis, which ranks 12th out of the Dow 30 stocks. By comparison, PepsiCo (PEP) is up 3% for the year and Keurig Dr Pepper (KDP) is 10% higher.