Coca-Cola Earnings Hobbled by Strong Dollar

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Coca-Cola Co. (NYSE: KO) reported first-quarter 2016 results before markets opened Wednesday morning. The soft-drink maker posted adjusted diluted earnings per share (EPS) of $0.45 on revenues of $10.28 billion. In the same period a year ago, the company reported $0.48 EPS on revenues of $10.71 billion. First-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.44 and $10.7 billion in revenues.

On a GAAP basis, the company reported EPS of $0.34, compared with $0.35 in the first quarter of last year. Coke’s organic revenue, which excludes currency exchange effects and other items, rose 2%. Exclusions for the quarter included $199 million in restructuring charges, $63 million the company’s productivity and reinvestment program, and $135 million related to its Venezuelan operations. Currency exchange rates accounted for a 10-point headwind on comparable operating income and a 12-point drag on comparable pretax income and earnings per share.

Cash from operations totaled $604 million, including a $471 million pension contribution. The company repurchased $155 million in stock during the first quarter.

Coke mostly stuck with its previous 2016 fiscal year guidance that organic revenue would rise 4% to 5%, with acquisitions and divestitures producing a four to five point headwind and currency exchange effects also expected to snip two to three points from reported revenues. Pretax income for 2016 was expected to rise by 6% to 8% on a currency neutral basis, with structural items costing the company three to four points and currency exchange effects costing eight to nine points. On a currency neutral basis, Coca-Cola said it expected EPS growth of 4% to 6% with the same negative impacts as those affecting pretax income.

CEO Muhtar Kent said:

Amidst a challenging global macro environment, the continued focus on our five strategic initiatives enabled us to gain global value share in the first quarter and deliver positive top-line growth and strong underlying margin expansion. Our operating results are driven by our commitment to sustainable growth, and we are confident that we have the right strategies in place to achieve our full-year outlook and drive long-term value for our system and shareowners.

Analysts have estimated second-quarter EPS of $0.60 and revenues of $11.75 billion. For the full year, analysts currently estimate EPS of $1.95 and revenues of $42.4 billion.

Coca-Cola’s shares traded down about 1.3% in Tuesday’s premarket, at $46.00 in a 52-week range of $36.56 to $47.13. Thomson Reuters had a consensus analyst price target of $47.73 before the report.