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Coke's Earnings Coverage Filled With Air

Marek Fuchs

But those headlines about Coca-Cola(KO Quote - Cramer on KO - Stock Picks)! Those leads!

It's two days later and I've been unreceptive to even the higher dosages, because as we saw recently with The New York Times'(NYT Quote - Cramer on NYT - Stock Picks) results, this is a case where the company's media relations department, those flunkies paid to put the company in the most favorable light, are more forthright about company results than the business media reports that follow it.

My downward spiral commenced when Coke reported its earnings and what I started seeing written from the business media looked like it was about solar companies, rather than a great but slow-growing sugar water peddler. The Associated Press ran with this eye popping lead:

"The Coca-Cola Co. reported Wednesday a 79 percent jump in fourth-quarter profit and maintained its growth targets despite a slowing U.S. economy, but has no plans to be more aggressive with its stock buybacks."

A nearly 80% rise in quarterly profit at Coke! And in this economy! I could hardly draw a breath, but surely there was an explanation, right? That just didn't look or smell right. I read on to the second sentence to see what did not add up. Here's what I found: "The results posted by the world's largest beverage maker beat Wall Street expectations but company's shares slipped."

Uh, a steady-as-she-goes grower like Coke broke out with an 80% jump in profits and the shares slipped? I had to read something else for clarification. I let my trembling fingers do the walking to Dailypress.com. It was there that the growth number that threw off radiant heat in the lead at AP migrated to the headline! Shouted Dailypress.com: Coca-Cola's 4Q profit up 79%. And there was nothing to dissuade me that this was the core truth in the two sentence summary that followed.

Time to press onward. What say you, Mr. Reuters? "Profit at Coke Jumps 79%, Helped by Exchange Rate."

Hmmm ... well, at least there was a mitigating factor included right after the 79%. But, uh, exchange rate as the mitigating factor? I don't follow Coke closely and wasn't aware of precise expectations, but since they are a great company in a sort of mature business that is still enjoying nice growth overseas, I figured profits might be up by what? Around 10%. So, um, exchange rates are the first item mentioned in going from 10% to almost 80%? Again, it didn't feel right in my bones. That goes double when the next two sentences weighed whether or not this constituted a slowdown. Even allowing for exchange-rate benefits, why are we talking slowdown after near 80% growth.

But then, halfway through this article, we got what wasn't even spotted in the other pair of lame-o articles. There were charges involved! The numbers were not as they seemed. So why wasn't that mentioned in the headlines and leads? Why was core performance ignored or subordinated to, at best, halfway through the article? Why did these second sentences crinkle a nose in puzzlement at why the stock hadn't reacted better, right after showcasing a number that (left unexplained) seemed to blow socks off?

For guidance -- and I don't believe I am saying this -- let's look at how the flaks at Coke portrayed the quarter. One would assume the purveyors of constant sunshine had buried any mention of charges to get that human growth hormone infused 79% mentioned so prominently, right? Wrong.

Coke's first line did showcase the 79%, but after a semi-colon (not even a full sentence later!) we are told that EPS increased 12%. Ahhh. Charges.

Even articles that included the breathless 79% in the lead could easily do a competent job at not totally misleading investors by running tame headlines and explanations of the 79% in the second sentence, right after mentioning it. Just look at The Wall Street Journal's mellow headline: "Coke Gets Lift From Abroad Amid U.S. Weakness."

That about sums it up, as far as the accurate overall takeaway goes. It then lifts the curtain with the 79% eye popper, that would not be my choice, but it's fine because it then explains:

"The Atlanta company's important North American business, its largest market by revenue, overcame declining sales in Coke's core sodas only as a result of last year's $4.1 billion acquisition of Energy Brands Inc.'s Glaceau enhanced water. The year-earlier results were held back by a charge of 23 cents a share."

That's all The Business Press Maven has to say on this. But, as when the Times flaks prominently mentioned an extra week of holiday numbers falsely pumping up monthly numbers while the business media just crowed about the miraculous increase in revenue, it is the ultimate betrayal of readers when the business media thinks less critically about numbers that make no instinctive sense than company flaks. Now can someone help me with these childproof pill bottles?