Coca-Cola profit growth slows

The consensus among analysts tracked by FactSet is that this soft drink company will report sales of 11 billion dollars and a profit of 70 cents per share in the first three months of 2024. This is equivalent to 3% year-on-year growth in profit. Compared to the previous quarter's increases of 9% and 7%, respectively, in sales,0.4% increaseI did.

While inflation has increased Coca Cola's spending over the past two years, the company has managed to pass most of that cost on to consumers without losing major business. Despite the fact that the company raised prices by 10%, sales volume increased 2% from 2022 in 2023.

However, as inflation subsides, rising prices will no longer be a factor driving sales growth. Also, if consumers begin to reduce their intake of soft drinks, there is a possibility that earnings growth will slow further or decline in the next few quarters. There is a possibility that new obesity medications such as Zepbound and Wegovy will adversely affect consumption.

There is a possibility that a strong dollar will cause further difficulties for Coca-Cola, which earns two-thirds of its profits from overseas markets.

Latin American sales for the fourth quarter of 2023 increased 24% year over year in local currency, but only increased 16% in dollar terms. Revenue growth in the European, Middle Eastern and African, and Asia-Pacific markets was hit by 14 points and 5 points, respectively, due to the effects of exchange rates.

This is expected to continue in the future. Management predicts that for 2024, the headwind on sales due to exchange will be 2% to 3%, and the impact on profits will be 4% to 5%.

In its latest financial forecast, Coca-Cola stated that it expects core business earnings to increase by 6% to 7% in 2024 and an increase of 4% to 5% with equivalent earnings per share. Compared to this, the increase in core business earnings in 2023 was 12%. Equivalent EPS increased 8%.