Why Is Coca-Cola (KO) Down 5.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Coca-Cola (KO). Shares have lost about 5.3% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Coca-Cola due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. Coca-Cola Beats Q3 Earnings & Sales Estimates, Revises 2024 ViewCoca-Cola has reported third-quarter 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. The company’s EPS rose year over year while sales declined. The results benefited from continued business momentum, aided by improved pricing across markets.Coca-Cola has reported comparable EPS of 77 cents in the third quarter, up 5% from the year-ago period. Comparable EPS also beat the Zacks Consensus Estimate of 74 cents. Unfavorable currency translations hurt the comparable EPS by 9 percentage points. Comparable currency-neutral earnings per share rose 13% year over year.Revenues of $11.85 billion declined 1% year over year but surpassed the Zacks Consensus Estimate of $11.61 billion. Organic revenues rose 9% from the prior-year quarter. Coca-Cola’s top line was hurt by declines across most of its operating segments. An improved price/mix in the quarter was offset by lower concentrate sales and adverse currency rates. In the reported quarter, Coca-Cola gained a global value share in the total number of non-alcoholic ready-to-drink beverages, led by Romania, France and South Africa.In dollar terms, comparable operating income rose 3.8% year over year to $3.7 billion. Comparable currency-neutral operating income advanced 14% on strong organic revenue growth across all segments, offset by currency headwinds. The comparable operating margin expanded 104 bps to 30.7%. The comparable currency-neutral operating margin expanded 274 bps to 32.4%.Detailed Picture of KO’s Q3 Volume, Pricing & SegmentsIn the reported quarter, concentrate sales moved down 2% year over year, whereas the price/mix improved 10%. The price/mix benefited from higher pricing in the markets facing intense inflation, which contributed 4 points to the improvement. Also, pricing actions across the marketplace and a favorable mix contributed to the rest of the increase. In the quarter, concentrate sales were one point behind unit case volume, mainly driven by the timing of concentrate shipments. Coca-Cola’s total unit case volume fell 1% year over year in the third quarter, driven by declines in China, Mexico and Türkiye.Coming to the cluster-category performance, the unit case volume was flat year over year for sparkling soft drinks and trademark Coca-Cola. These categories benefited from growth in Latin America, North America and the Asia Pacific, offset by a decline in Europe, Middle East and Africa (EMEA). Coca-Cola Zero Sugar advanced 10%, aided by growth in all geographic operating segments. Meanwhile, the sparkling flavors category fell 1% year over year, owing to declines in EMEA and Latin America, offset by growth in North America and the Asia Pacific.Volumes for juice, value-added dairy and plant-based beverages dipped 3% in the third quarter, led by declines in Minute Maid Pulpy in the Asia Pacific and Mazoe in Africa. This was partly negated by growth in fairlife in the United States.Unit volumes for the water, sports, coffee and tea category dropped 4% year over year in the third quarter. Coca-Cola witnessed a 6% volume slip in the water category, led by declines across all operating segments. Sports drinks fell 3%, as gains in EMEA were more than offset by declines across other geographic segments. The coffee business dipped 6% due to a soft Costa coffee performance in the U.K. The tea volume rose 7%, backed by growth in the Asia Pacific, Latin America and EMEA.Segmental Details: Revenues rose 11% year over year for Latin America, 10% for North America and 1% for Global Ventures. However, revenues declined 1% for EMEA and 20% for Bottling Investments. Meanwhile, revenues remained flat year over year for the Asia Pacific segment. Organic revenues improved 25% year over year in Latin America, 16% in EMEA, 10% each in North America and Bottling Investments, and 5% in the Asia Pacific. However, organic revenues were flat in Global Ventures.KO’s Guidance for 2024Management has updated its view for 2024. It anticipates organic revenue growth of 10% for 2024 compared with the 9-10% rise mentioned earlier. Comparable net revenues are expected to include a 5% currency headwind based on current rates and hedge positions. The guidance also includes a 4-5% negative impact of acquisitions, divestitures and structural changes. The company anticipates an underlying effective tax rate of 18.8% for 2024.Comparable currency-neutral EPS for 2024 is expected to increase 14-15% year over year compared with the previously mentioned 13-15% rise. The company anticipates comparable EPS to grow 5-6% year over year for 2024. Comparable EPS growth is expected to include currency headwinds of 9%, and impacts of 1-2% from acquisitions, divestitures and structural changes. The company expects most currency headwinds to result from currency devaluation due to intense inflation. Management envisions an adjusted free cash flow of $9.2 billion for 2024, including $11.4 billion in cash flow from operations. Capital expenditure is likely to be $2.2 billion.For fourth-quarter 2024, comparable revenues are expected to include a 4% currency headwind, and a 4-5% negative impact of acquisitions, divestitures and structural changes. Comparable EPS is estimated to include a 10% currency headwind, and a 3-5% negative impact of acquisitions, divestitures and structural changes. Additionally, the company provided its initial view for 2025. It expects comparable net revenues to include a low-single-digit currency headwind based on the current rates and hedged positions. Meanwhile, comparable EPS is anticipated to include a mid-single-digit currency headwind for 2025.How Have Estimates Been Moving Since Then?It turns out, fresh estimates have trended downward during the past month.VGM ScoresAt this time, Coca-Cola has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Coca-Cola has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. 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