Coca-Cola’s Organic Growth Surprises to the Upside

Image: Coca-Cola’s shares are trading near all-time highs.

By Brian Nelson, CFA

Coca-Cola (KO) reported solid second quarter results on July 23, with net revenues up 3% and organic non-GAAP revenues advancing an impressive and better-than-expected 15% thanks to a 9% increase in price/mix and 6% growth in concentrate sales. Reported operating income grew 10%, and comparable currency-neutral operating income jumped 18%. The company’s operating margin expanded to 21.3% versus 20.1% in the prior-year period. Its comparable operating margin (non-GAAP) was 32.8% versus 31.6% in the same period a year ago. Comparable non-GAAP earnings per share advanced 7%, to $0.84.

During the quarter, organic growth was particularly strong in its Europe, Middle East, and Africa region as well as its Latin America region, where organic sales increased 30% and 28%, respectively. Organic revenue increased 10% in North America and 4% in the Asia Pacific region. The Europe, Middle East, and Africa region as well as its Latin America region experienced 32% and 28% currency-neutral operating income growth in the quarter. Comparable currency neutral operating income growth was 8% in its North America region. Coca-Cola noted that it gained value share in total nonalcoholic ready-to-drink (NARTD) beverages in the period, and global unit case volume increased 2% in the quarter.

Looking to the full year 2024, Coca-Cola expects to generate organic non-GAAP revenue growth in the range of 9%-10%, “which consists of operating performance at the high end of the company’s long-term growth model and the anticipated pricing impact of a number of markets experiencing intense inflation.” For 2024, management is targeting comparable non-GAAP earnings per share growth of 5%-6% relative to $2.69 per share in 2023, while it expects to deliver comparable currency-neutral non-GAAP earnings per share growth of 13%-15% on the year. Free cash flow is expected to be $9.2 billion for the year. Shares of Coca-Cola yield 3% at the time of this writing.