Coke Blasts Targets

But North American weakness weighs on execs.
Author:
Publish date:

Coke (KO) - Get Report posted a first quarter that surged past Wall Street's expectations, fueled by revenue growth that came in twice as fast as analysts were predicting.

The Atlanta-based drinks company made $1.26 billion, or 54 cents a share, for the quarter ended March 30, up from the year-ago $1.11 billion, or 47 cents a share. Excluding certain items, latest-quarter earnings were 56 cents a share. Revenue jumped 17% from a year ago to $6.1 billion.

Analysts surveyed by Thomson Financial were looking for a 53-cent profit on sales of $5.63 billion.

"You can track our progress bottle by bottle around the globe," CEO Neville Isdell said. "We grew both sparkling and still beverages while efficiently allocating our resources."

The company showed strong growth internationally but posted an 11% decline in North American operating income, as case volume dropped 3%.

Net revenues for the quarter increased 2%, reflecting a 5% decrease in concentrate sales offset by positive pricing and a mix benefit from strong sales of energy drinks and Powerade. Operating income declined 11% for the quarter, reflecting the lower concentrate sales and higher input costs on the finished goods businesses.

Retail unit case volume decreased 3% in the quarter. Results in the quarter reflected the expected difficult sparkling beverage industry environment and the 28% decline in warehouse-delivered water as the system refocuses resources behind the more profitable Dasani business. The decline in warehouse-delivered water reduced Retail's unit case volume growth rate by 1%.

"Our 6% unit case volume growth in the quarter, cycling 5% growth in the prior year, is our highest quarterly growth rate since 2002," said operating chief Muhtar Kent. "The strength of our international business is evident, delivering 9% unit case volume growth, which more than offset the volume decline in North America.

"We know what we need to do in North America and are carefully addressing the issues. It will take some time to achieve the results we desire in this key market, but we expect sequential improvement as we move into the second half of the year. Importantly, we achieved broad-based growth across nearly all our key international geographies, which is a testament to our ability to manage our global geographic portfolio nimbly to generate consistent returns for shareowners."