Earnings Preview: Coca-Cola 3Q results

All Associated Press news

By EMILY FREDRIX

MILWAUKEE (AP) - Coca-Cola Co. reports earnings for its fiscal third quarter on Tuesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Coca-Cola, the world's biggest beverage marker, continues to navigate a market in which consumers have been cutting back on soft drinks amid the recession and increasingly seeking out healthier juices and teas, rather than soft drinks.

But now analysts say the tide is turning and that some cash-strapped consumers are trading back down to soft drinks as they look to save money.

That will bode well for the Atlanta-based maker of best-selling Coca-Cola and other drinks like Sprite, although it is still focusing on creating more teas and fruit juices. The company recently bought a minority stake in coconut water company ZICO Beverages LLC. Analysts say coconut water — which has health benefits and is low in calories — could be part of a new beverage trend.

Health is a big concern right now for Coca-Cola. The company said last month it will place calories-per-serving and servings-per-container details on the side of almost all its drinks. The move to more prominently display nutritional facts comes while lawmakers are facing increasing pressure to consider taxes on sugary sodas, which some health experts blame for rising obesity rates.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect third-quarter profit of 81 cents per share and revenue of $8.12 billion in the quarter ending in September. Excluding one-time items, the company earned 81 cents per share in the same period a year earlier.

ANALYST TAKE: UBS analyst Kaumil S. Gajrawala recently raised his estimates, saying he expected improving trends in Coca-Cola's third quarter and less drag from foreign currency exchange. He said research by UBS analysts around the world showed improving trends in the U.S., India and other areas in the quarter.

U.S. consumers have been cutting back on their soft drink purchases and switching to healthier juices and teas. But Gajrawala said that consumers are going back to soft drinks as they trade down from more costly purchases to save money.

WHAT'S AHEAD: The company continues to push for inroads in foreign markets. Last month it announced plans to invest an additional $200 million in Vietnam in the next three years. Gajrawala said the investment, which is being made with a bottler, is equal to Coca-Cola's investment in the market since 1994.

About 85 percent of Coca-Cola's profit is from sales in foreign countries, so the drag of foreign currency has been a concern for investors. The company said previously it expected foreign currency to hurt sales in the third quarter by between 12 percent and 14 percent. But Gajrawala said it's likely that in the third quarter the drag was less. A strong U.S. dollar hurts foreign sales for U.S. companies once those sales are converted from foreign currency back to American dollars.

STOCK PERFORMANCE: Shares rose 13 percent in the quarter to finish at $53.70. They closed Friday at $55.01.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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