Shares of Coca-Cola Co (NYSE: KO) inches up in pre trading session on Monday as it outperformed Wall Street expectations for first-quarter revenue and earnings, owing to strong demand for its sodas as well as several price hikes implemented to offset increasing material and transportation expenses.
The corporation announced in February that it will boost soda prices “across the world” in 2023, although at a slower rate, even as competitor PepsiCo paused price increases.
According to the creator of Fanta and Sprite, average selling prices jumped 11% in the first quarter, while worldwide unit case volumes increased 3%.
“The strength in case volume growth gives us confidence that sales momentum can continue because Coca-Cola’s sales strategies are resonating with consumers,” said Edward Jones analyst Brittany Quatrochi.
Because of their near-dominance of the worldwide carbonated beverages industry, Pepsi and Coca-Cola have experienced little or no customer opposition to price rises.
Nonetheless, Coca-Cola CEO James Quincey stated on an earnings call that “there is uncertainty on how the consumer environment may ultimately play out in 2023.”
Quincey also stated that the recent financial crisis has increased uncertainty about purchasing patterns in Europe, while consumption in China is still rebounding to pre-pandemic levels after restraints were lifted.
Meanwhile, the first-quarter operating margin fell to 30.7% from 32.5% the previous year due to higher operational costs, increased marketing spending, investments, and a strong currency.
During the call, executives stated that while freight charges and other commodity costs were down, prices for sweeteners and juices were increasing.
Wedbush analyst Gerald Pascarelli said that with pricing expected to moderate over the course of the year, this should come in tandem with moderating levels of commodity inflation, which should help to protect profitability.
According to Refinitiv statistics, revenue increased 4.3% to $10.96 billion, topping projections of $10.80 billion, while adjusted profits per share of 68 cents above expectations of 64 cents.
