Analysts on Wall Street expect a rise of 6% in the earnings per share, to 52 cents.
The revenue forecast is expected to fall 2.5% to $10.68 Billion.
A strong US dollar may weigh down on Coca-Cola’s international sales. These represent about two-thirds the total revenue of the company.
Since September, the US Dollar Index (which tracks the dollar against an assortment of currencies) has increased by nearly 8%, increasing the price of Coca-Cola products abroad, and decreasing the value of earnings from foreign markets when they are converted into dollars.
Coca-Cola warned its investors about these pressures on currency, and forecasted a 10% decline in adjusted earnings per share during the fourth quarter.
Acquisitions, divestitures and structural changes will also create an additional 3%-4% of drag.
The stock of the company has fallen 12.5% since its September peak, but it is still up 7.5% over the last year.
Kevin Grundy is a senior research analyst with BNP Paribas. In a note published on Friday, he wrote that as consumer spending normalizes in North America, domestic results will accelerate. These represent about 35% in the total profits of the company.
Fairlife is a major growth driver
Under the leadership of CEO James Quincey, Coca-Cola has worked to diversify their product line.
Fairlife is the premium brand of milk and protein drinks that Fairlife has developed.
According to Grundy, although Fairlife accounts for only 5% of Coca-Cola’s US business today, the product will contribute 35% of its domestic growth by 2024.
The brand is expected to grow by 20% per year over the next 5 years, as the demand for high quality dairy products that are protein rich continues to increase.
Quincey, highlighting its potential, said: “Fairlife is a great company that has grown.”
Fairlife retail sales will surpass $1 billion by 2022 despite being three times more expensive than traditional milk. This is a dramatic increase from $90 millions in 2015, when the company expanded across the country.
Garrett Nelson, CFRA analyst, said that the milk brand was becoming “a growth driver” and helping to offset declines in sales of many sugary soft drinks with higher calorie content.
Investors seek broader diversification progress
Coca-Cola is still heavily dependent on the soda business. This accounts for 60% of their revenue.
Despite efforts by the company to diversify into energy drinks, flavoured water, coffee and other beverages, its product line has been largely unchanged for six years.
Investors are closely monitoring Tuesday’s report on earnings for any updates to the company’s diversification strategy.
Uncertainty in the regulatory environment is another potential problem.
Robert F. Kennedy Jr. has been proposed as the next head of Health and Human Services. He is a critic of sugary drinks and processed food.
Kennedy proposed policy to curb soda consumption. She cited links with obesity and other issues.
He could be appointed and push for regulations which would impact Coca-Cola’s core business.
Yet, Grundy still believes Coca-Cola has a good position to adapt to changing consumer tastes, pointing out that 19 of the 20 biggest brands offer sugar-free alternatives.
It remains to be determined if this will be sufficient to counteract regulatory risks and pressures on currencies.
The post Coca-Cola earnings report: What to expect today may change as new information becomes available.
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