Coca-Cola’s 1Q Results Beat Estimates Amid Uneven Global Economic Recovery

Coca-Cola reported a 5% year-on-year increase in net revenues of $9 billion, beating analysts’ estimates of $8.6 billion. The beverage giant reported 1Q non-GAAP EPS of $0.55 that came in ahead of consensus estimates of $0.50. The company acknowledged that, “The path to recovery, however, remains asynchronous around the world.”

Coca-Cola’s (KO) Chairman and CEO, James Quincey said, “We remain focused on emerging stronger and executing against our growth accelerators during the recovery phase. We are pleased with the progress we are making. We are encouraged by improvements in our business, especially in markets where vaccine availability is increasing and economies are opening up, and we remain confident in our full year guidance.”

The growth in revenues was driven by a 5% rise in concentrate sales while price/mix increased by 1%. The price/mix rise was mainly driven by pricing in Latin America and North America. The first quarter also included five additional days that led to revenues benefiting from a 6-point growth.

For FY21, KO anticipates non-GAAP organic revenues to grow in percentage terms in the high-single digits. KO expects non-GAAP EPS to grow in the high single to low double digits range in percentage terms versus $1.95 in FY20. The percentage growth in non-GAAP EPS is anticipated to benefit by 2% to 3% due to exchange rate fluctuations and also by the impact of hedged positions.

The company expects to generate non-GAAP free cash flow of $8.5 billion and has forecasted capex of $1.5 billion for FY21.

Separately, KO announced plans to list Coca-Cola Beverages Africa (CCBA) as a separate, publicly-traded company. As a result, KO intends to sell some of its stake in CCBA through an initial public offering (IPO) within the next 18 months. (See Coca-Cola stock analysis on TipRanks)

Following the 1Q earnings, Merrill Lynch analyst Bryan Spillane reiterated a Buy and a price target of $56 on the stock (3.7% upside potential).

Spillane told investors in a commentary note that he expects comparable net sales to “include about a +3% to +4% currency tailwind” with comparable EPS “expected to include a +5% to
+6% currency tailwind” in the second quarter of 2021.

Meanwhile, KO scores a Moderate Buy consensus rating from the analyst community. That’s based on 4 analysts recommending a Buy and 2 analysts suggesting a Hold. The average analyst price target of $58.80 implies 8.9% upside potential to current levels.

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