Coca-Cola gains after organic sales in Q2 top expectations

Coca-Cola Company (NYSE:KO) edged higher in early trading on Tuesday after beating organic sales estimates with its Q2 earnings report and backing its full-year guidance.

“Amid a shifting external landscape in the second quarter, the ability of our system to stay both focused and flexible enabled us to stay on course in the first half of the year,” stated Coca-Cola (NYSE:KO) CEO James Quincey.

Revenue was up 0.8% year-over-year to $12.5 billion for the quarter that ended on June 27. The revenue performance included 6% growth in price/mix and a 1% decline in concentrate sales. Unit case volume declined 1%, as growth in Central Asia, Argentina, and China was more than offset by declines in Mexico, India, and Thailand.

Organic revenue rose 5% vs. +4.5% consensus. The organic revenue growth was led by gains in the Latin America (+13%), Europe, Middle East & Africa (+4%), and Asia Pacific (+5%).

Sparkling soft drinks unit colume declined 1% during Q2. Trademark Coca-Cola declined 1%, as growth in Europe, Middle East and Africa was more than offset by a decline in Latin America. Coca-Cola Zero Sugar grew 14%, driven by growth across all geographic operating segments.

Comparable operating margin expansion during the quarter of 37.1% was driven by organic revenue (non-GAAP) growth, the timing of marketing investments, and effective cost management, partially offset by currency headwinds.

Comparable EPS was up 4% year-over-year to $0.87 vs. $0.84 consensus and included the impact of a 5-point currency headwind.

Cash flow used in operations during the quarter was -$1.4 billion, which reflected $6.1 billion of the contingent consideration payment made during the first quarter in conjunction with the acquisition of Fairlife in 2020. Free cash flow declined approximately $5.5 billion versus the prior year, resulting in negative free cash flow of approximately $2.1 billion.

Looking ahead, organic revenue is still expected to increase 5% to 6% during the full year, which is a range with a midpoint of +5.5% vs. the consensus estimate of +5.7%. Coca-Cola (NYSE:KO) sees EPS of $2.88 vs. $2.97 consensus. The company also confirmed that it plans to launch an offering made with U.S. cane sugar to expand its Trademark Coca-Cola product range. The addition is designed to complement the company’s strong core portfolio and offer more choices across occasions and preferences.

Shares of Coca-Cola (NYSE:KO) moved 0.7% higher in premarket action, while PepsiCo (PEP) and Keurig Dr Pepper (KDP) also showed modest gains.