Coca-Cola Company (NYSE: KO) earnings release for the 2nd quarter of their 2020 fiscal year
Category: Stock Market and Coca-Cola (KO)
Date: 21 July 2020 Stock Price of Coca-Cola : $46.12 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of The Coca-Cola Company the world's best known beverage maker, that owns brands such as Coca-Cola, Fanta, Minute Maid, Powerade and Costa Coffee. Revenues for the group was down -28% compared to the same quarter of the previous year as the Covid-19 pandemic bites.
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We believe the second quarter will prove to be the most challenging of the year; however, we still have work to do as we drive our pursuit of 'Beverages for Life' and meet evolving consumer needs. "
About Coca-Cola
The Coca-Cola Company (NYSE: KO) is a total beverage company, offering over 500 brands in more than 200 countries and territories. In addition to the company’s Coca-Cola brands, our portfolio includes some of the world’s most valuable beverage brands, such as AdeS soy-based beverages, Ayataka green tea, Dasani waters, Del Valle juices and nectars, Fanta, Georgia coffee, Gold Peak teas and coffees, Honest Tea, innocent smoothies and juices, Minute Maid juices, Powerade sports drinks, Simply juices, smartwater, Sprite, vitaminwater and ZICO coconut water. We’re constantly transforming our portfolio, from reducing sugar in our drinks to bringing innovative new products to market. We’re also working to reduce our environmental impact by replenishing water and promoting recycling. With our bottling partners, we employ more than 700,000 people, helping bring economic opportunity to local communities worldwide.
Overview of Coca-Cola's 2nd quarter 2020 earnings report
Data below refers to the latest quarter unless specified otherwise:
- Revenues: $7.150 billion (down from $9.997 billion for the same period of the previous year)
- Revenues decreased by -28% over the last 12 months
- Cost of goods sold: $3.013 billion (down from $3.921 billion for the same period of the previous year)
- Cost of goods sold decreased by -23% over the last 12 months
- Net earnings: $1.779 billion (down from $2.607 billion for the same period of the previous year)
- Diluted earnings per share: $0.41 (down from $0.61 for the same period of the previous year)
- PE ratio: 28.8
- Diluted weighted-average shares outstanding: 4.316 billion (up from 4.305 billion for the same period of the previous year)
- Cash and cash equivalents: $10.037 billion
- Cash and cash equivalents per share: $2.32
- Cash and cash equivalents makes up 5.04% of Coca-Cola's market capital
- Cash and cash equivalents makes up 10.6% of Coca-Cola's total assets
- Accounts receivable: $3.849 billion
- Accounts receivable makes up 4.1% of Coca-Cola's total assets
- Inventories: $3.501 billion
- Inventories makes up 3.7% of Coca-Cola's total assets
- Goodwill: $16.617 billion
- Essentially the goodwill shows the value of Coca-Cola's brand names.
- Goodwill pe share: $3.85
- We therefore estimate that 8.3% of Coca-Cola's stock price is made up by the value of their brand's
- Goodwill makes 17.54% of of Coca-Cola's total assets
- Stockholders equity in Coca-Cola: $19.189 billion
- Stockholders equity per share: $4.44
- So Coca-Cola is trading a 10.4 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms ten to trade at.
- To put this in perspective the S&P500 trades at a price to book value of 3.7 Read more about the S&P500 here
- Cash generated from operations for first 2 quarters of 2020: $2.786 billion:
- Cash generated from operations per share for first 2 quarters of 2020: $0.64
Coca Cola's management commentary on their 2nd quarter 2020 earnings report
ATLANTA, July 21, 2020 – The Coca-Cola Company today reported second quarter 2020 results and provided an update on strategic actions that are positioning the system to emerge stronger from the ongoing coronavirus pandemic. The Coca-Cola system remained agile in the second quarter, with a focus on maintaining a safe environment for employees while also providing necessary products and services to consumers, customers and communities during this unprecedented time.
"I'm proud of the people of the Coca-Cola system as we continue to adjust and accelerate our strategies in this fastchanging landscape," said James Quincey, chairman and CEO of The Coca-Cola Company. "We believe the second quarter will prove to be the most challenging of the year; however, we still have work to do as we drive our pursuit of 'Beverages for Life' and meet evolving consumer needs."
"I'm proud of the people of the Coca-Cola system as we continue to adjust and accelerate our strategies in this fastchanging landscape," said James Quincey, chairman and CEO of The Coca-Cola Company. "We believe the second quarter will prove to be the most challenging of the year; however, we still have work to do as we drive our pursuit of 'Beverages for Life' and meet evolving consumer needs."
Business Environment and Strategic Actions Update
Since the company's last earnings update in April, global unit case volume trends have improved sequentially, from a decline of approximately 25% in April to a decline of approximately 10% in June. Unit case volume for July month-todate was down mid single digits globally. Performance has been driven by improving trends in away-from-home channels, along with sustained, elevated sales in at-home channels. The improvement in away-from-home trends during the quarter closely correlated with the easing of lockdowns, and the company expects this correlation to continue in the second half of 2020. While the company believes the second quarter will be the most severely impacted quarter of the year, given the ongoing uncertainty surrounding the coronavirus pandemic and levels of lockdown, the ultimate impact on full year 2020 results is unknown. The company's balance sheet remains strong, and the company is confident in its liquidity position as it continues to navigate through the crisis. Despite the high degree of uncertainty, the company is committed to emerging stronger by gaining share and consumers, maintaining strong system economics, strengthening its reputation with stakeholders and positioning the organization to win in the new reality. The company is accelerating its strategy to accomplish these goals. This includes focusing investments against a defined growth portfolio by prioritizing brands best positioned for consumer reach and share advantage. The company will also streamline the innovation pipeline against initiatives that are scalable regionally or globally as well as maintain a disciplined approach to local experimentation in order to further strengthen the company's leader, challenger and explorer framework. The portfolio will be supported by a refreshed marketing approach, with a stepchange in marketing investment effectiveness and efficiency. The company will also lead the Coca-Cola system in driving system-wide efficiencies to support these investments, and will invest in new capabilities to capitalize on emerging, lasting shifts in consumer behaviors
Company Updates
• Refresh the world, make a difference: In the midst of unprecedented challenges, the company remains grounded in its purpose. For example, The Coca-Cola Foundation has partnered with the world’s largest humanitarian network, the International Red Cross and Red Crescent Movement, to help provide hospitals with critical medical equipment and supplies; to support community relief programs; and to fund public coronavirus education and awareness campaigns. The partnership has supported programs in more than 60 countries, reaching an estimated 7.5 million people impacted by the pandemic.
• Driving relevance with loved brands: In the first original ad during the pandemic for brand Coca-Cola, the company celebrates the rediscovered joy in sharing a meal with loved ones. "The Great Meal" features 13 real households in eight countries preparing and sharing home-cooked meals over an ice-cold Coca-Cola, bringing to life the comfort and authenticity of the brand's connection to food. "The Great Meal" kicks off a global campaign for brand Coca-Cola, "Together Tastes Better," which is rolling out this month. This modular, digital-first campaign was created for Coca-Cola teams around the world to tailor and localize for their markets and platforms. "Together Tastes Better" is the latest example of how the company is leveraging marketing investments for the highest impact and largest reach.
• Innovating quickly to address consumer needs: The company recently announced plans to roll out a new pouring option to meet consumer needs with its latest Coca-Cola Freestyle technology innovation – contactless, mobile pouring using a smartphone. As the coronavirus pandemic continues to reshape consumer behaviors, the contactless Coca-Cola Freestyle solution allows consumers to choose and pour drinks in just a few seconds, without creating an account or downloading an app. The mobile experience is rolling out to Coca-Cola Freestyle dispensers across the United States by the end of the year.
• Addressing social justice concerns: The company is taking a multi-faceted approach to social justice, focusing on listening, leading, investing and advocating. This includes meeting with stakeholders, employees and other business leaders. The company has paused social media activity for July to review policies, including its own, and to hold partners to a higher level of accountability and transparency. The company has committed to spend an incremental $500 million with Black-owned suppliers over the next five years in the United States. In support of social justice, The Coca-Cola Foundation has contributed $4 million to several initiatives and, to date, the company has contributed an additional $1.3 million through brands Coca-Cola and Sprite.
Full Year 2020 Considerations
As the coronavirus pandemic continues to evolve, there is uncertainty around its ultimate impact; therefore, the company's full year financial and operating results cannot be reasonably estimated at this time. For comparable net revenues (non-GAAP), the company expects a 3% to 4% currency headwind based on the current rates and including the impact of hedged positions. 7 For comparable operating income (non-GAAP), the company expects a high single-digit currency headwind based on the current rates and including the impact of hedged positions. The company’s underlying effective tax rate (non-GAAP) is estimated to be 19.5%.
Since the company's last earnings update in April, global unit case volume trends have improved sequentially, from a decline of approximately 25% in April to a decline of approximately 10% in June. Unit case volume for July month-todate was down mid single digits globally. Performance has been driven by improving trends in away-from-home channels, along with sustained, elevated sales in at-home channels. The improvement in away-from-home trends during the quarter closely correlated with the easing of lockdowns, and the company expects this correlation to continue in the second half of 2020. While the company believes the second quarter will be the most severely impacted quarter of the year, given the ongoing uncertainty surrounding the coronavirus pandemic and levels of lockdown, the ultimate impact on full year 2020 results is unknown. The company's balance sheet remains strong, and the company is confident in its liquidity position as it continues to navigate through the crisis. Despite the high degree of uncertainty, the company is committed to emerging stronger by gaining share and consumers, maintaining strong system economics, strengthening its reputation with stakeholders and positioning the organization to win in the new reality. The company is accelerating its strategy to accomplish these goals. This includes focusing investments against a defined growth portfolio by prioritizing brands best positioned for consumer reach and share advantage. The company will also streamline the innovation pipeline against initiatives that are scalable regionally or globally as well as maintain a disciplined approach to local experimentation in order to further strengthen the company's leader, challenger and explorer framework. The portfolio will be supported by a refreshed marketing approach, with a stepchange in marketing investment effectiveness and efficiency. The company will also lead the Coca-Cola system in driving system-wide efficiencies to support these investments, and will invest in new capabilities to capitalize on emerging, lasting shifts in consumer behaviors
Company Updates
• Refresh the world, make a difference: In the midst of unprecedented challenges, the company remains grounded in its purpose. For example, The Coca-Cola Foundation has partnered with the world’s largest humanitarian network, the International Red Cross and Red Crescent Movement, to help provide hospitals with critical medical equipment and supplies; to support community relief programs; and to fund public coronavirus education and awareness campaigns. The partnership has supported programs in more than 60 countries, reaching an estimated 7.5 million people impacted by the pandemic.
• Driving relevance with loved brands: In the first original ad during the pandemic for brand Coca-Cola, the company celebrates the rediscovered joy in sharing a meal with loved ones. "The Great Meal" features 13 real households in eight countries preparing and sharing home-cooked meals over an ice-cold Coca-Cola, bringing to life the comfort and authenticity of the brand's connection to food. "The Great Meal" kicks off a global campaign for brand Coca-Cola, "Together Tastes Better," which is rolling out this month. This modular, digital-first campaign was created for Coca-Cola teams around the world to tailor and localize for their markets and platforms. "Together Tastes Better" is the latest example of how the company is leveraging marketing investments for the highest impact and largest reach.
• Innovating quickly to address consumer needs: The company recently announced plans to roll out a new pouring option to meet consumer needs with its latest Coca-Cola Freestyle technology innovation – contactless, mobile pouring using a smartphone. As the coronavirus pandemic continues to reshape consumer behaviors, the contactless Coca-Cola Freestyle solution allows consumers to choose and pour drinks in just a few seconds, without creating an account or downloading an app. The mobile experience is rolling out to Coca-Cola Freestyle dispensers across the United States by the end of the year.
• Addressing social justice concerns: The company is taking a multi-faceted approach to social justice, focusing on listening, leading, investing and advocating. This includes meeting with stakeholders, employees and other business leaders. The company has paused social media activity for July to review policies, including its own, and to hold partners to a higher level of accountability and transparency. The company has committed to spend an incremental $500 million with Black-owned suppliers over the next five years in the United States. In support of social justice, The Coca-Cola Foundation has contributed $4 million to several initiatives and, to date, the company has contributed an additional $1.3 million through brands Coca-Cola and Sprite.
Full Year 2020 Considerations
As the coronavirus pandemic continues to evolve, there is uncertainty around its ultimate impact; therefore, the company's full year financial and operating results cannot be reasonably estimated at this time. For comparable net revenues (non-GAAP), the company expects a 3% to 4% currency headwind based on the current rates and including the impact of hedged positions. 7 For comparable operating income (non-GAAP), the company expects a high single-digit currency headwind based on the current rates and including the impact of hedged positions. The company’s underlying effective tax rate (non-GAAP) is estimated to be 19.5%.
Coca-Cola (NYSE: KO) stock price history
The image below, obtained from Google, shows the stock price history of Coca-Cola over the last 5 years. And it's been a fairly average time for Coca-Cola stockholders. 5 years ago the stock was trading at around $41.00 a stock and its currently trading at $45.38 a stock. That's very modest return of 10.6% provided to Coca-Cola stockholders over the last 5 years.
The stock of Coca-Cola is trading at a lot closer to its 52 week low of $36.27 than it is to its 52 week high of $60.13, which to us is a clear indication that the short term sentiment and momentum towards Coca-Cola's stock is negative at this point in time. It is not really surprising considering the significant market sell off triggered by the Covid-19 pandemic and the impact its having on global economic growth. Read more about the stock market sell off here.
The stock of Coca-Cola is trading at a lot closer to its 52 week low of $36.27 than it is to its 52 week high of $60.13, which to us is a clear indication that the short term sentiment and momentum towards Coca-Cola's stock is negative at this point in time. It is not really surprising considering the significant market sell off triggered by the Covid-19 pandemic and the impact its having on global economic growth. Read more about the stock market sell off here.
Coca-Cola (KO) stock vs PepsiCo (PEP) stock over the last 2 years
The image below shows the stock price performance of Coca-Cola and PepsiCo over the last 2 years. These to firms are direct rivals in the beverage industry. The summary below shows the stock price performance of Coca-Cola and PepsiCo over the last 2 years
So the stock of PepsiCo (PEP) has easily outperformed the stock of Coca-Cola (KO) over the last 2 years.
- PepsiCo: 15.75%
- Coca-Cola: -1.09%
So the stock of PepsiCo (PEP) has easily outperformed the stock of Coca-Cola (KO) over the last 2 years.
Recent coverage of Coca-Cola
The extract below covers the latest news regarding Coca-Cola as obtained from CNBC.com
Coca-Cola on Tuesday reported its largest decline in quarterly revenue in at least 25 years, but the company sees demand improving as global lockdowns ease.
CEO James Quincey said the company believes the second quarter will likely be the most challenging of the year.
Shares of the company rose 2% in premarket trading.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
Excluding items, the beverage giant earned 42 cents per share, topping the 40 cents expected by analysts surveyed by Refinitiv
Read the full article here
Coca-Cola on Tuesday reported its largest decline in quarterly revenue in at least 25 years, but the company sees demand improving as global lockdowns ease.
CEO James Quincey said the company believes the second quarter will likely be the most challenging of the year.
Shares of the company rose 2% in premarket trading.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: 42 cents, adjusted, vs. 40 cents expected
- Revenue: $7.2 billion vs. $7.2 billion expected
Excluding items, the beverage giant earned 42 cents per share, topping the 40 cents expected by analysts surveyed by Refinitiv
Read the full article here
Coca-Cola (NYSE: KO) latest stock valuation
So what is Coca-Cola's stock worth based on the release of their 2nd quarter 2020 earnings report ? Based on Coca-Cola's latest earnings report our valuation models provide a target price (full value price) of Coca-Cola's (KO) stock at $44.20 a stock. Based on our target price (full value price) we believe the stock of Coca-Cola's is close to being fully valued
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target price (full value price) which in this case is $44.20, so a good entry point into Coca-Cola's stock would be at $39.80 or below. We expect the stock of Coca-Cola's (KO) to trade in a narrow range around its current price in coming weeks and months.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target price (full value price) which in this case is $44.20, so a good entry point into Coca-Cola's stock would be at $39.80 or below. We expect the stock of Coca-Cola's (KO) to trade in a narrow range around its current price in coming weeks and months.
Next earnings release of Coca-Cola
It is expected that Coca-Cola will release their 3rd quarter 2020 earnings report in late October 2020