Coca-Cola Co.’s (KO: 54.00 +0.76 +1.43%) second-quarter GAAP earnings grew a solid 16.3% to $2.4 billion from $2.0 billion in the year-ago quarter. Excluding special items, adjusted earnings per share came in at $1.06, which surpassed both the Zacks Consensus Estimate of $1.03 as well as the year-ago result of 92 cents per share.
The better-than-expected result was driven by volume growth and improved margin performance. Shares of Coca-Cola have gained 2.22% as of this blog post in Wednesday trading on the New York Stock Exchange.
Quarterly Details
During the quarter, Coca-Cola’s net revenues rose 4.9% to $8.7 billion from $8.3 billion in the year-ago period. The growth was mainly attributable to a 5% increase in concentrate sales and a 2% positive impact from currency translation, partially offset by a negative 2% impact from deconsolidation of certain entities. Global unit case volume increased 5% in the quarter, driven by a 6% improvement in international unit case volume.
Geographically, the Eurasia & Africa division witnessed volume growth of 10% year-over-year led by India, which surged 22%, while Turkey and Russia grew by 10% and 6%, respectively. The Latin American segment volumes increased 7% driven by Brazil (13%) and Mexico (5%). The Pacific region recorded volume growth of 6%, led by Philippines and China. However, overall volume growth was partially offset by a modest 2% growth in North America coupled with a 1% decline in Europe.
Coca-Cola’s gross profit during the quarter increased 6.8% year-over-year to $5.7 billion, while gross margin rose 120 basis points (bps) to 65.9% due to favorable currency translations and reduced commodity costs. Selling, general and administrative expenses, as a percentage of net revenues, declined 120 bps to 33.2%, mainly due management initiatives to improve productivity. Accordingly, operating income grew 13.3% year-over-year to $2.8 billion, while operating margin rose 240 bps to 31.9%.
Balance Sheet and Cash Flow
Coca-Cola exited the quarter with $7.7 billion in cash and a long-term debt-to-capitalization of 16.2%. During the first half of 2010, the company generated $4.3 billion of cash from operations and deployed $2.0 billion towards dividends, $1.4 billion towards investments and $893 million towards capital expenditure.
Outlook and Zacks Consensus
Outlook and Zacks Consensus
Moving forward, Coca-Cola stated that it was cautiously optimistic on the second half of 2010 amid weakened consumer confidence in the U.S. and government deficit concerns in Europe. Moreover, the company also remains on track to achieve $500 million in cost savings by 2011 and complete the proposed acquisition of Coca-Cola Enterprises’(CCE: 27.82 -0.24 -0.86%) North American business by the fourth quarter of 2010.
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