I know I'm a bit late and others were quicker. Nevertheless, here is my classification and explanation of the numbers. As beginner-friendly as possible 😬
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Coca-Cola $KO (+2,3 %) published its figures for the fourth quarter and full year 2024 today.
Coca-Cola is one of those stocks that almost everyone knows and many people have it in their portfolio. At the beginning of this year, I considered liquidating the position and shifting into other high-growth stocks, but I couldn't bring myself to do so and am now holding my position for the time being. According to DeepDive, Coca Cola currently accounts for just under 2.5% of my portfolio.
The company is a real heavyweight in the consumer sector and has a certain stability and an impressive dividend history. The quarterly figures published today show solid growth, but also some challenges.
I took a look at the news release "Coca-Cola Reports Fourth Quarter and Full Year 2024 Results" [1] and also read the transcript of the earnings call [2].
Q4 vs. Estimates [3]
Business figures at a glance
📊 Q4 2024 (October - December):
- Sales: $11.5 billion (+6% compared to the previous year)
- Organic sales (adjusted for currency effects and acquisitions): +14 %
- Operating profit: +19
Earnings per share (EPS):
- Reported EPS: $0.51 (+12%)
- Adjusted EPS (without special effects): $0.55 (+12 %)
- Unit case volume: +2 %
➡️ Coca-Cola sold 2 % more beverages than in the same quarter of the previous year.
➡️ Growth was particularly strong in China, Brazil and the USA.
📅 Full year 2024:
- Sales: $47.1 billion (+3%)
- Organic sales: +12%
- Operating profit: -12% (partly due to a one-off Fairlife write-down)
Earnings per share (EPS):
- Reported EPS: $2.46 (-0.4%)
- Adjusted EPS: $2.88 (+7%)
- Unit case volume: +1 %
➡️ Coca-Cola Zero Sugar (+9 %) and tea (+4 %) were particularly popular.
➡️ There were declines in water (-2%) and coffee (-3%).
While the fourth quarter was strong, the reported operating profit for the full year was depressed by the Fairlife write-down (-12 %). Without this one-off effect, adjusted and currency-adjusted operating profit would have risen by 16%.
Fairlife amortization - What's behind it?
I was wondering again what fairlife depreciation is all about, and here is the explanation:
Coca-Cola had to take a $3.1 billion write-down related to the Fairlife brand.
➡️ Fairlife is a dairy brand that Coca-Cola acquired in 2020.
➡️ The value of this acquisition has now been revalued (fair value measurement).
➡️ The Fairlife write-down of $3.1 billion results from a revaluation of goodwill. Coca Cola had originally paid a higher price for Fairlife, but due to changed market conditions part of this value was written off.
➡️ Such write-downs are accounting losses, but do not directly affect cash flow or ongoing business development.
Regional development - Where Coca-Cola is growing
🌍 North America: +11% sales growth in 2024, particularly due to price increases.
Latin America: Strongest growth (+25% organic sales in Q4), but strongly influenced by high inflation in Argentina.
🌍 Europe, Middle East & Africa: Growth due to price adjustments, but currency devaluations depressed earnings (more on this below).
🌍 Asia-Pacific: Solid growth, but sales per unit fell slightly as more sales were made in lower-priced categories (e.g. due to smaller packaging units or promotions)
What does currency devaluation mean and why is it problematic?
When Coca-Cola sells beverages in Europe or Latin America, for example, the company earns euros or local currencies there.
➡️ These revenues end up being converted into US dollars because Coca-Cola is a US company.
💡The problem:
If the US dollar gets stronger, then Coca-Cola gets less dollars per euro/peso when it converts.
This makes it look on paper as if sales are falling, even though Coca-Cola is selling the same amount or even growing in these regions.
Example of currency devaluation:
- Let's assume that Coca-Cola makes 100 million euros in sales in Europe.
- If the exchange rate is 1.20 USD/EUR, this means a turnover of 120 million dollars.
- If the exchange rate falls to 1.05 USD/EUR, Coca-Cola only receives 105 million dollars for the same 100 million euros - 15 million less!
➡️ This happened in many markets in 2024, especially in Latin America (Argentina) and parts of Africa.
➡️ The currency devaluation therefore had a negative impact on reported sales.
Expansion: more fridges for more sales
Coca-Cola has expanded its presence in stores worldwide:
- 250,000 new points of sale
- 600,000 new refrigerators installed
Investments were particularly strong in Latin America, Asia and Africa.
➡️ In these markets, 90% of drinks are sold cold - more fridges = more sales!
Dividends & share buybacks - Coca-Cola remains an investor favorite
✔️ Coca-Cola paid $8.4 billion in dividends in 2024 - dividends have increased every year for 62 years!
✔️ Share buybacks worth $1.8bn - reducing the number of shares and increasing earnings per share in the long term.
What is the tax payment to the IRS?
➡️ Coca-Cola has deposited $6.0 billion as collateral in a long-running tax dispute with the U.S. Internal Revenue Service (IRS). If the company loses the lawsuit, the money will be used to pay the taxes.
➡️ If Coca-Cola wins, some of the money could flow back.
➡️ Without this one-off effect, free cash flow would have increased by 11% to $10.8 billion!
Outlook for 2025 - What does Coca-Cola expect?
📈 Planned sales growth: 5-6 %
📉 Currency impact: -3 to -4% on sales, -6 to -7% on profit
💰 Expected earnings per share: $2.88 (+2 to 3%)
💵 Free cash flow forecast: approx. $9.5 billion
Conclusion - Coca-Cola remains stable, but currencies are a risk
- Stable sales growth and strong market position
- Expansion through refrigerators and retail outlets pays off
- Strong dividend history - a classic for dividend investors
- Currency risks and tax dispute weigh on figures
I continue to hold the share and am always happy when I drink an ice-cold Coke Zero!
Thanks for reading 🤝
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Sources:
[1]
https://investors.coca-colacompany.com/
[2]
https://web.quartr.com/companies/4595/events/248468/transcript?targetTime=0.0
[3]
