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Coca-Cola’s Upcoming 4Q17 Results: What We Can Expect

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Part 2
Coca-Cola’s Upcoming 4Q17 Results: What We Can Expect PART 2 OF 5

What Might Drag Coca-Cola’s 4Q17 Revenue

Persistent decline

Coca-Cola’s (KO) revenue of $9.1 billion in 3Q17 surpassed analysts’ estimate of $8.7 billion. However, it was the tenth consecutive quarter of decline. Coca-Cola, which has a significant exposure to carbonated beverages, is struggling to deliver higher volumes as more and more consumers are reducing consumption of soda for healthier beverage choices.

What Might Drag Coca-Cola’s 4Q17 Revenue

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Revenue in 3Q17

Coca-Cola’s revenue declined 14.6% on a year-over-year basis in 3Q17. The significant fall in the company’s top line was due to an 18 percentage point adverse impact of refranchising of its bottling operations. On a reported basis, all the company’s geographic segments reported higher revenue with the exception of Asia Pacific. The performance of the Asia Pacific segment was impacted by adverse foreign currency fluctuations.

Excluding the impact of structural and currency headwinds, the company’s organic revenue grew 4% in 3Q17. Its higher organic revenue was mainly driven by a favorable price and mix.

Revenue expectations

Analysts expect Coca-Cola’s 4Q17 revenue to decline 21.4% to $7.4 billion. For 2017, analysts forecast the company’s revenue to fall 15.8% to $35.2 billion. These declines are expected due to the impact of refranchising of the company’s bottling territories. Coca-Cola expects its organic revenue to rise 3% in 2017.

The lackluster revenue growth expectation for Coca-Cola also reflects a weak volume growth trend. In the first nine months of fiscal 2017, its unit case volumes were flat. PepsiCo’s (PEP) North America Beverages segment reported a 2% volume decline in the first nine months of fiscal 2017.

We’ll look at earnings expectations for Coca-Cola in the next part of this series.

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