Earnings outlook | Coca-Cola (KO. US) revenue and profit or achieve double growth, can e-commerce revenue bring surprises?

Zhitong Finance APP learned that Coca-Cola Company (KO. US) will announce its third quarter 2021 results before U.S. stock market on October 27, and the company's revenue and profit are expected to grow. Zacks Consensus expects the company's third-quarter earnings to be 58 cents per share, up 5.5 percent year-over-year. Consensus expectations have not changed over the past 30 days. For third-quarter revenue, the market generally believed that it was $9.6 billion, an increase of 10.9% year-on-year.

It is worth mentioning that in the financial report of the previous quarter, the leading soft drink giant's revenue unexpectedly reached 19.3%. Over the past four quarters, its average profit has exceeded Zacks Consensus's expectation of 16.5%.

Growth points

Coca-Cola's results in recent quarters have benefited from improved price mix strategies and increased centralized sales, which are expected to continue in the third quarter. Due to the increase in consumer mobility and the reopening of the economy in some regions, there has been an increase in over-the-counter channel sales. In addition, sales growth under the Coca-Cola trademark, carbonated beverages, nutritional drinks, fruit juices, dairy products and plant beverages is expected to be reflected in the company's third-quarter results.

Meanwhile, the company's third-quarter results are expected to reflect the gains from Coca-Cola's accelerated investments to expand its digital business. Driven by shifts in consumer behavior during the pandemic, Coca-Cola has doubled the growth rate of its e-commerce channels in many countries. The company has been strengthening its connection with consumers and further experimenting with various digital initiatives through a hands-on approach to capture online demand, which may have boosted sales in the third quarter.

Aggressive cost-saving measures across the company are also expected to help support operating margins in the third quarter, which is expected to be positive for profits.

Risk factors

However, the company has been under pressure from rising supply chain costs, including rising transportation and commodity costs. On last quarter's earnings call, the company said it would manage the increase in input costs through hedging, but the impact of those pressures on the third quarter remained uncertain, with continued supply chain headwinds expected to hurt the company's profits to some extent.

In addition, increased marketing spending, along with increases in short-term incentives and stock-based compensation, is also expected to lead to an increase in sales, general and administrative expenses in the third quarter.

Analyst opinion

UBS analyst Sean King said the bank gave Coca-Cola a "buy" rating and was confident in the company ahead of Wednesday's earnings report.

In addition, given that Coca-Cola is trading at a lower price than PepsiCo (PEP. US), and its shares are still 10% below the previous year's high, and the bank expects Coca-Cola earnings per share (EPS) to grow by 7-9% in 2022, which is enough to push the stock higher. It is reported that in the past 12 quarters, Coca-Cola has had 9 quarters of revenue exceeding expectations and 11 quarters of profit exceeding expectations.