Coke's first-quarter earnings expected to rise

Beverage giant will hold shareholders meeting Wednesday in Delaware

By JOE GUY COLLIER
The Atlanta Journal-Constitution
Published on: 04/14/08

Coca-Cola is expected to deliver strong earnings this week driven by a weak dollar, robust international sales and the addition of new beverages, according to industry analysts.

Coke, the world's largest beverage firm, is expected to make 62 cents a share in the first quarter of 2008, up 6 cents from the same period a year ago, according to a survey of analysts by Thomson Financial. The estimates exclude one-time items.

The Atlanta-based beverage firm is scheduled to report first-quarter earnings Wednesday. It also will hold its annual shareholders meeting the same day in Wilmington, Del.

For all of 2007, Coke's revenues rose 20 percent to $28.9 billion and net income was up 18 percent to $5.98 billion.

Analysts expect revenue and profits to continue to rise. A weak dollar should boost Coke profits made overseas. Increased international sales and the addition of new companies, such as Glaceau and Fuze, also are expected to drive volume. Glaceau makes Smartwater and Vitaminwater, and Fuze makes juice drinks.

North America, which was down 1 percent in 2007, could be up 1 percent to 2 percent, according to a report issued Monday by John Faucher, an analyst for J.P. Morgan. Coke's Latin America, Africa, Eurasia and Pacific groups should all be up, the report said.

"We think expectations remain reasonable and the company remains attractively positioned given the macro environment, weaker dollar and higher oil prices," Faucher wrote.

Coke does face challenges because more of the growth is coming from acquisitions, not internally developed products, the report said.

"With Cokes' focus shifting from fixing the company over the last few years to growing through acquisitions, the risk from a return and execution standpoint is rising," Faucher wrote.

Credit Suisse analyst Carlos Laboy last week raised his earnings estimate from 60 cents a share to the consensus 62 cents a share based on favorable exchange rates for U.S. companies operating abroad. Coke's volume growth could slow because of a recession in North America and cash-strapped Brazilians, coming off an early Carnivale season.

"However, we believe any slowdown would be a one-off and the global success of Coke Zero, a possible Glaceau launch in Europe this summer and the Olympics in China should help to reaccelerate volume growth in the balance of 2008," Laboy wrote.

In addition to the earnings release Wednesday, Coke shareholders will have several issues to consider in Delaware. Muhtar Kent, Coke's president and chief operating officer, is expected to be elected to the board. Kent takes over July 1 as chief executive officer for Neville Isdell.

Shareholders also have made proposals to allow non-binding shareholder votes on Coke's executive compensation, require the company to have an independent board chairman that has not previously served as a Coke executive, and set up a Coke committee on human rights. Coca-Cola's board of directors has recommended voting against each of these measures. It says it already has a committee to consider human rights issues, the Public Issues and Diversity Review Committee.