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Coca-Cola earnings preview: Trailing Pepsi

Mohit Oberoi
Author: Mohit Oberoi

Last Updated: July 17, 2020

Coca-Cola is expected to report lower revenues and profits in the second quarter when it reports next  Tuesday. The beverage industry has not been immune to the pandemic which has hit Coca-Cola harder than its soft drinks rival Pepsi.

Zacks consensus estimates show that analysts expect Coca-Cola’s second-quarter revenues to fall 24% year over year to $7.59bn, while the company’s earnings per share are expected to fall 31.7% to $0.43.

Pepsi, that reported its second-quarter earnings on Monday posted better-than-expected earnings with sales falling only 3.1% to $15.95bn as compared to the corresponding quarter in 2019. Pepsi’s adjusted earnings per share came in at $1.32, better than Wall Street’s estimate of $1.25 for the quarter.

However, Coca-Cola’s revenue mix differs from Pepsi, in that generates a lot of revenue from packaged food and snacks, whose sales are largely immune from the stay-at-home orders. But Beverage sales have taken a hit as places such as cinemas were closed while traffic at convenience stores and gas stations fell.

Coca-Cola shares have underperformed Pepsi this year. While Coca-Cola shares are down 15% so far in 2020, Pepsi shares are down only 0.6%. The S&P 500 Index has also recouped its 2020 loses and is down only 0.4% for the year.

In March, Coca-Cola withdrew its 2020 guidance due to the pandemic. In a note accompanying its first-quarter earnings in April, Coca-Cola said: “In March, as the coronavirus pandemic spread globally, countries meaningfully increased social distancing and shelter-in-place mandates.”

It added: “In markets around the world, the company subsequently saw significant changes in consumer purchase patterns, notably substantial declines in away-from-home channels. In at-home channels, the company witnessed early pantry loading in certain markets, followed by more normalized demand levels, along with a sharp increase in e-commerce.”

However, it sounded positive about its China operations. “We’re seeing encouraging signs of increased consumption as outlets reopen, resulting in sequential improvement in China,” said the company. However, it added: “Consumption is still lower than the prior year, and we expect a full recovery to take time, especially as there are still limits on crowd sizes.”

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Mohit Oberoi

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.