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Written by: Aarin Chiekrie | Hargreaves Lansdown
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Coca-Cola’s first-quarter revenue grew 9% organically to $11.2bn, ignoring one-off items and currency impacts.
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Underlying operating profit rose 13% to $3.6bn.
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Free cash flow improved by $274mn to an inflow of $158mn.
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Full-year guidance upgraded.
Coca-Cola’s positive momentum from 2023 has spilt into the new year, with revenue fizzing higher at near double-digit rates on an organic basis. This uplift was well ahead of market expectations, driven mainly by higher prices to help offset intense inflation in certain markets. Despite these continued inflationary pressures and increased marketing spending, tight cost controls in other areas meant that underlying operating profits grew ahead of revenue.
With 62 years of annual dividend increases under its belt and selling its products in over 200 countries and territories worldwide, investors would be forgiven for thinking this is a boring mature company with little growth prospects. But Coca-Cola still has plenty of tricks up its sleeve to help boost profits. The main lever currently being pulled is refranchising its most important bottling partners by building roughly 20-25% stakes in them. This ownership structure helps to align the group’s interests with those of its bottling partners, shifting focus onto long-term growth. This tactic appears to be working, with group margins climbing in the right direction. All in, it was a strong start to the year for the beverage giant, with full-year revenue and earnings guidance getting nudged higher as a result. Alongside healthy cash flows and falling debt levels, there could be room for increased share buybacks this year.