Coca-Cola forecasts profits will grow after price increases

Coca-Cola forecast full-year adjusted earnings per share to rise between 4% and 5%.

Coca-Cola has forecast that profit will grow this year well above analysts' expectations, as demand for its drinks remains resilient in the face of multiple price hikes to tackle higher costs.

Coca-Cola's near duopoly in the global carbonated drinks market along with PepsiCo has made it easier for the company to raise prices over the last few quarters to counter higher freight, commodity, and staff costs. 

"The outsized pricing is driving outsized revenues," said Wedbush Securities analyst Gerald Pascarelli. The drinks giant also saw an increase in operating margin for the first time in three quarters. It posted operating margins of 20.5% in the December quarter compared to 17.7%, a year earlier.

Inflation

Coca-Cola in October warned signs were emerging of inflation taking a bigger bite out of consumer spending power, especially in Europe with categories like juices and bottled water in the region seeing a shift towards cheaper private label brands.

Mr Pascarelli said while easing energy and natural gas costs in Europe are encouraging for 2023, demand in the region is still feeling the biggest pinch from Coca-Cola's price increases. Average selling prices rose 12% in the fourth quarter, the maker of Sprite and Fanta said, while unit case volumes slipped 1%. Last week, PepsiCo said it would not raise prices of its drinks and snacks further after multiple rounds of price hikes last year.

Coca-Cola forecast full-year adjusted earnings per share to rise between 4% and 5%. The company sees 2023 organic revenue growth of 7% to 8%. Its fourth-quarter net revenue rose 7% to about $10.1bn (€9.4bn). 

Reuters