Coca-Cola Stock Jumps on Beat-and-Raise Quarter

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Coca-Cola (NYSE:KO) stock surged after opening bell on Tuesday, thanks to the beverage giant’s robust third-quarter earnings and revenue gains. The company also boosted its guidance for 2023.

Coca-Cola actually surpassed analystsʻ expectations, beating revenue and earnings projections. The beverage maker’s stock price climbed more than 3% in early trading on what is looking like a good day for the markets — with tech giants Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) set to release their latest earnings results after the market closes.

All three major indexes, the S&P 500 (+0.7%), Dow Jones Industrial Average (+0.8%) and the Nasdaq Composite (+0.7%) were up Tuesday as of 10:20 a.m. Eastern.

Revenue jumps 8% in Q3

Coca-Cola had a solid third quarter, with revenue up 8% year over year to $12 billion and earnings per share up 9% to 74 cents. Unit case volume, which refers to the number of products sold, was up 2% year over year, led by 7% growth in Latin America. North America unit sales were flat.

Sparkling soft drinks were up 2%, led by a 3% increase in Coca-Cola Zero Sugar, while juice drinks rose 2%. The water/sports drinks category saw a 1% year-over-year increase in unit sales. In fact, the numbers were impressive given the increases in prices. When factoring in the higher prices, Coca-Cola posted a 9% increase in price/mix sales.

Coca-Colaʻs operating margin fell slightly to 27.4% in Q3 from 27.9% a year ago. However, the company gained overall market share in non-alcoholic ready-to-drink (NARTD) beverages.

Investors also reacted positively to the beverage giantʻs outlook for the rest of fiscal 2023. The firm now expects organic revenue growth of 10% to 11% for the year, up from a projected 8% to 9% growth after the second quarter. Further, Coca-Cola expects currency-adjusted EPS growth of 13% to 14% for this fiscal year, up from its previous estimate of 9% to 11% EPS growth. 

Finally, the beverage maker reiterated its guidance of $9.5 billion for free cash flow, with cash flow from operations of approximately $11.4 billion, minus capital expenditures of roughly $1.9 billion.  

“We delivered an overall solid quarter and are raising our full-year topline and bottom-line guidance in light of our year-to-date performance,” said James Quincey, chairman and CEO of Coca-Cola. “Our leading portfolio of brands, coupled with an aligned and motivated system, positions us to win in the marketplace today while also laying the groundwork for the long term.”

Coca-Cola raises full-year guidance

The company said it plans to release its 2024 guidance in January upon the release of its fourth-quarter earnings, but the momentum it has gained through this inflationary period is promising.

A week ago, Coca-Cola declared a quarterly dividend of 46 cents per share at a yield of 3.4%. This is the 60th consecutive year that Coca-Cola has increased its dividend payout, making it a Dividend King. Only a relatively few stocks have longer streaks of revenue increases.

Coca-Cola is trading at a price-to-earnings (P/E) ratio of 22, which is down from 25 a year ago. The company’s P/E is hovering near its lowest level since the start of the pandemic.

The consensus rating on Coca-Cola stock among analysts is a buy, with a median price target of about $66 per share in the next 12 months. That would be a 20% increase over the current share price of around $55.65.