The Coca-Cola Company (KO - Free Report) delivered a strong third-quarter 2018, with better-than-expected earnings and sales. This marked the sixth straight quarter of an earnings beat while sales topped estimates for the fifth consecutive quarter. Third-quarter results gained from the effective execution of the company’s strategies to evolve as a consumer-centric total beverage company.

Alongside the introduction of products, the company is focused on lifting and shifting successful brands globally. It also benefited from the acceleration of its sparkling soft drinks category through investment and innovation.

Shares of Coca-Cola increased nearly 1% after solid third-quarter results. Moreover, the stock decreased 1.5% in the last three months, outperforming the industry’s decline of 10.9%.

Q3 in Detail

The company’s third-quarter 2018 comparable earnings were 58 cents per share that surpassed the Zacks Consensus Estimate of 55 cents. The bottom line also improved 14% from the year-ago period, driven by ongoing productivity efforts and disciplined growth strategies. Currency translation negatively impacted earnings by 8%.

Coca-Cola Company (The) Price, Consensus and EPS Surprise

Coca-Cola Company (The) Price, Consensus and EPS Surprise | Coca-Cola Company (The) Quote

Revenues of $8,245 million beat the Zacks Consensus Estimate of $8,227 million. However, net revenues declined 9% year over year due to 13% adverse effect from the refranchising of company-owned bottling operations. This represented the company’s 14th consecutive quarterly fall.

However, organic revenues grew 6%, aided by concentrate sales improvement of 4% and price/mix growth of 2%.

Volume and Pricing

Coca-Cola’s total unit case volume expanded 2%, boosted by growth in the Coca-Cola Trademark. Further, the company witnessed 2% rise in price/mix, backed by continued strength in the core business.

Category Cluster Performance: Sparkling beverage unit case volume increased 2% (compared with 2% growth in the prior quarter). Juice, dairy, and plant-based beverages witnessed a 3% decline (compared with 2% decrease in the last reported quarter). Water, enhanced water and sports drinks were up 5% (in comparison with 4% growth in Q2), and Tea and Coffee slipped 2% (compared with 1% decline in Q2).

Segment Details

Revenues grew 12% in North America, and 1% in Europe, the Middle East & Africa (EMEA). However, revenues at the Asia Pacific segment edged down 1% while revenues dipped 3% at the Latin America segment. Bottling Investments were down 62% in the quarter under review.

Organic revenues grew across the board, backed by persistent innovation and revenue growth management initiatives within sparkling soft drinks, with double-digit volume growth of Coca-Cola Zero Sugar across all groups. Additionally, Fuze Tea and smartwater brands witnessed strong growth. Organic revenues for North America were up 2% while it improved 9% for EMEA, 19% for Latin America, 4% for the Asia Pacific and 10% for Bottling Investments segments.

Margins

Comparable operating margin expanded 575 basis points (bps), given the divestitures of lower-margin bottling businesses and ongoing productivity efforts. The upside was partly offset by the adoption of the new revenue recognition accounting standard and currency headwinds.

2018 Guidance

Organic revenues are expected to rise by at least 4%. Acquisitions/divestitures (mainly the bottler re-franchising efforts) are expected to hurt revenues by 16% while currency is likely to affect revenues by 1%. The Accounting Standards Update 2014-09 will positively impact revenues by 2%.

Comparable currency neutral operating income (structurally adjusted) is expected to increase at least 9%. Foreign exchange is expected to hurt comparable operating income by 4%. Structural changes are likely to have 3% negative impact on comparable operating income.

The company expects adjusted EPS to grow 8-10% from the prior year’s comparable EPS of $1.91.

Coca-Cola expects to buy back shares worth $1 billion in 2018. The adjusted effective tax rate is likely to be 20.3%. Cash from operations is likely to be nearly $8 billion.

The company currently carries a Zacks Rank #3 (Hold). 

Upcoming Peer Releases

Molson Coors Brewing Company (TAP - Free Report) is scheduled to report quarterly results on Oct 31.

Keurig Dr Pepper Inc. (KDP - Free Report) is scheduled to release quarterly results on Nov 7.

Monster Beverage Corp. (MNST - Free Report) is expected to announce quarterly results on Nov 14.