Beverage company Coca-Cola (NYSE:KO) beat analysts' expectations in Q1 CY2024, with revenue up 3.1% year on year to $11.3 billion. It made a non-GAAP profit of $0.72 per share, improving from its profit of $0.68 per share in the same quarter last year.

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A pioneer and behemoth in carbonated soft drinks, The Coca-Cola Company (NYSE:KO) is a storied beverage company best known for its flagship soda of the same name.

Beverages and Alcohol

These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.

Sales Growth

Coca-Cola is one of the most widely recognized consumer staples companies in the world. Its influence over consumers gives it extremely high negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don't have).

As you can see below, the company's annualized revenue growth rate of 11.3% over the last three years was decent as consumers bought more of its products.

This quarter, Coca-Cola reported decent year-on-year revenue growth of 3.1%, and its $11.3 billion in revenue topped Wall Street's estimates by 3%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.

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Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Coca-Cola generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Coca-Cola's average quarterly volume growth was a healthy 2.6%. Even with this good performance, we can see that most of the company's gains have come from price increases by looking at its 13% average organic revenue growth. The ability to sell more products while raising prices indicates that Coca-Cola enjoys some degree of inelastic demand.

In Coca-Cola's Q1 2024, year on year sales volumes were flat. By the company's standards, this result was a meaningful deceleration from the 3% year-on-year increase it posted 12 months ago. We'll be watching Coca-Cola closely to see if it can reaccelerate demand for its products.

Key Takeaways from Coca-Cola's Q1 Results

We were impressed that Coca-Cola beat past analysts' organic revenue growth expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. On the other hand, its operating margin missed analysts' expectations. The company maintained its full year guidance for EPS, showing that it is staying on track and that the macro in which it operates hasn't changed much since giving guidance roughly three months ago. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is flat after reporting and currently trades at $61.65 per share.

So should you invest in Coca-Cola right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.