The Coca-Cola Company (KO)’s Q2 Profit Falls

The Coca-Cola Company (KO)’s Q2 Profit Falls
Couleur / Pixabay

Before the market opened this morning, Tuesday July 16, The Coca-Cola Company (NYSE:KO) revealed its earnings for the three months ended June 30. According to the release, the company earned 63 cents per share in the period on revenues of $12.75 billion. The firm’s shares will open on today’s market at $41.01.

The Coca-Cola Company (KO)'s Q2 Profit Falls

Analysts following the soft drinks giant were looking for earnings per share of 63 cents from the company on quarterly revenues of $13 billion. In the same three months of 2012, The Coca-Cola Company (NYSE:KO) earned 61 cents per share on revenue of $13.1 billion. The company has underperformed the market so far in 2013.

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Rivals pulling ahead?

Since the start of the year, shares in The Coca-Cola Company (NYSE:KO) have risen by a shade over 13 percent, comparing unfavorably with the 17 percent gain made by the S&P 500, and quite badly with the 23 percent growth in the value of its closest rival PepsiCo, Inc. (NYSE:PEP). The Coca Cola Company has by no means fallen behind PepsiCo in terms of sales but as an investment, the firm’s old rival was the better pick so far in 2013.

In the last year’s trading, the situation looks a great deal worse. In the last twelve months, shares in The Coca-Cola Company (NYSE:KO) have risen by just 6 percent, while PepsiCo, Inc. (NYSE:PEP) shares have risen by 20 percent. The Coca Cola Company is a world beater, but a mix of factors are having a depressing effect on its sales.

International Pressures On Coca-Cola

Coca Cola is trying to increase its mix of sales by expanding the amount of product it sells in international markets. There has been significant growth in demand for soft drinks around the world in the last decade, cushioning the company from the worst effects of economic hardship in the United States. The current economic climate is not really favorable anywhere however, and competition is fierce.

The Coca-Cola Company (NYSE:KO) is trying to counter these trends by investing heavily in soft drink brands around the world, boosting its stable of brands. The strategy is hoped to allow the company to compete in international markets with pre-built brands. It comes at a hefty cost, however.

This strategy is part of a more general reorganization that is hoped to see the company get completely out of the low margin bottling and delivery business in order to nestle itself firmly in the branding and concentrates business.

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