By Mike Esterl
Coca-Cola Co. is scheduled to announce its second-quarter
earnings before the market opens Wednesday. Here's what you need to
know:
EARNINGS FORECAST: Net income of 60 cents is the consensus of
analysts surveyed by Thomson Reuters, compared with 64 cents a year
earlier. Coke doesn't give quarterly guidance, but reiterated in
April it expects 2015 earnings per share to grow by a
mid-single-digit percentage after stripping out foreign-exchange
swings and one-off items.
REVENUE FORECAST: Revenue of $12.08 billion is forecast,
compared with $12.57 billion a year earlier.
WHAT TO WATCH:
--- FOREIGN EXCHANGE: Coke derives most of its profit from
abroad, making the beverage giant vulnerable to foreign-exchange
swings when it translates results back into U.S. dollars. It
estimated in April that weakening foreign currencies would
represent headwinds of 7 percentage points on revenue and 10
percentage points on operating income in the second quarter. For
the full year, it forecast headwinds of 6 and 10 percentage points,
respectively.
-- VOLUME VS PRICE: Coke has posted tepid volume growth the last
two years as consumers around the globe scaled back on soda. But
lately it has been doing a better job of offsetting that by raising
prices, especially in the U.S., where the company also is pushing
smaller packages like 7.5-ounce "mini cans'" that cost consumers
more on a per-ounce basis. Wells Fargo expects Coke to report 0.8%
volume growth and 1.9% price/mix growth globally in the 2Q.
-- COST CUTTING: Investors will be watching for updates on
Coke's restructuring push after it announced a $3 billion
cost-cutting plan last October to redirect savings from layoffs and
zero-base budgeting to more marketing. Still, J.P. Morgan expects
Coke's 2Q gross margin to contract 80 to 90 basis points from a
year earlier to 60.6%, hurt by foreign-exchange swings and bottler
divestments. The company also could share more details about its
refranchising efforts in the U.S., where it plans to divest more
than half of its distribution by the end of 2017.
Write to Mike Esterl at mike.esterl@wsj.com
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