What To Expect From Coca-Cola’s Q1 2019 Results?

by Trefis Team
Coca Cola
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Coca-Cola Company (NYSE: KO) is set to announce its financial results for Q1 2019 on April 23, 2019, followed by a conference call with analysts. Total revenues for Coca-Cola have largely trended lower over recent quarters, falling from $8.9 billion in Q2 2018 to $7.1 billion in Q4 2018. Lower revenue was primarily driven by the loss of revenue from the refranchising of company-owned bottling operations and the impact of currency headwinds. However, the trend is expected to reverse, as revenues are projected to increase by 3%-4% (y-o-y) in Q1 2019 with most of the refranchising already completed, coupled with benefits from a number of acquisitions throughout 2018. Market expectation is for the company to report adjusted earnings of $0.46 per share in Q1 2019, marginally lower than $0.47 per share in Q1 2018. Lower earnings are likely to be a reflection of rising transportation costs and currency swings.

We have summarized our key expectations from the announcement in our interactive dashboard – How is Coca-Cola expected to fare in Q1 2019 and what is the outlook for the full year? In addition, here is more Consumer Staples data.

A} Revenue Trend


  • Revenue from the EMEA region has been under pressure due to a decline in price/mix primarily due to negative geographic mix from the timing of shipments across the Middle East and North Africa.
  • Additionally, continued double-digit growth in Coca-Cola Zero Sugar and strong performance in Fuze Tea was offset by the impact of a challenging macroeconomic environment in certain key African and Middle Eastern markets.

Latin America

  • In spite of volume declining by double-digits in Argentina, segment revenues have been more or less stable over the last couple of quarters largely driven by strong performance in Mexico through revenue growth management initiatives, as well as positive price/mix across all business units.
  • The segment is expected to see a pick-up in 2019 with KO’s increasing market share in non-alcoholic ready-to-drink (NARTD) beverages.

North America

  • Revenue from North America has declined in the last quarter due to lower volume of sparkling soft drinks, juice, dairy, and plant-based beverages.
  • Tea volume declined low single-digits, impacted by deprioritizing low-margin tea products. Additionally, refranchising of certain operations in the region has led to lower revenues.
  • However, revenue is expected to increase going forward as most of the refranchising is already completed, coupled with high growth in Coca-Cola Zero Sugar and strong performance in Sprite.


  • Revenue in APAC faced pressure in Q4 2018 with lower volumes in the Philippines and Australia and  the impact of the deprioritization of low-margin commodity water.
  • However, the segment is once again expected to register growth, led by strong sales across India and Southeast Asia, benefiting from strong marketing and innovation within Trademark Coca-Cola and Sprite, coupled with rising market share in NARTD beverages, sparkling soft drinks, and tea and coffee.

Bottling Investments

  • Revenue from the bottling business has been decreasing due to refranchising of the company’s bottling operations.
  • However, with most of this program already behind us, the impact of refranchising is expected to be negligible in 2019.

B} Expenses Trend

  • Coca-Cola’s total expenses have been declining over the quarters due to benefits from refranchising of the high-cost bottling business.
  • Additionally, lower tax expense with the implementation of the TCJ Act has led to significant reduction in total expenses on a y-o-y basis.
  • We expect the extension of the company’s productivity plan to drive margin growth going forward.

What is the outlook for the full year?

  • Revenue is expected to increase by 4.6% to $33.3 billion in 2019, driven by growth across all major segments, offset by a lower revenue from the bottling business. However, with most of the refranchising already completed, the revenue loss from the segment is not expected to be as significant as in 2018.
  • Revenue growth would also be driven by inorganic growth strategies of Coca-Cola, with the company announcing several key acquisitions in 2018, including Costa Limited and a strategic partnership with BODYARMOR. Additionally, it also announced the acquisition of full ownership in Chi Ltd, which is a fast-growing leader in expanding beverage categories, including juices, value-added dairy, and iced tea in Nigeria.
  • We expect net income margin to rise only marginally to about 21% in 2019, from 20.2% in 2018. Margin growth would be driven by the ongoing refranchising of low-margin bottling operations and Coca-Cola’s new productivity plan which has been extended to 2019 to achieve incremental savings of about $800 million. However, rising transportation costs and currency swings are expected to be potential drags on the company’s margins, thus limiting the upside on earnings.

Trefis has a price estimate of $50 per share for Coca-Cola’s stock. We believe that an expanding footprint in the emerging markets, new product offerings, and strong organic sales growth would support growth in KO’s stock price.


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