Coca-Cola Co. warned Tuesday that foreign exchange rates that boosted its earnings in the third quarter would turn against the company in the fourth quarter, and that sent its shares down slightly in morning trading.
The world's largest soft-drink maker gets the majority of is sales from outside the United States, so shifts in currency and the effects of hedging strategies could have a noticeable impact on results.
"That may be spooking folks a little bit because this is a huge, huge international story," said Edward Jones analyst Jack Russo. "How currency moves definitely has an impact on the stock.
Coke posted a third-quarter profit that slightly beat Wall Street estimates, helped by higher sales volume, price increases, as well as the currency benefit.
But it said that currency exchange rates will reduce its fourth-quarter operating income by a low- to mid-single-digit percentage rate, while still boosting full-year income by a low- to mid-single-digit rate.
Coke's shares were down 21 cents, or 0.3 per cent, at $66.79 (U.S.) in morning trading.
There was strong growth in emerging markets such as India and China, and sales volume in North America gained as well, despite a 2-per-cent price increase, which often has the effect of curbing sales.
The company raised prices 3 per cent in North America on its core soda brands to counteract higher costs for commodities such as fuel and sweetener. Excluding a bump from new cross-licensed brands such as Dr Pepper, Coke's soda volume fell 1 per cent, but was offset by increases of 9 per cent for Powerade and 39 per cent for Gold Peak tea.
The company said it anticipates an $800-million increase in costs this year, up from a prior expectation for a $700-million increase.
Net income was $2.22-billion, or 95 cents per share in the third quarter, up from $2.06-billion, or 88 cents per share, a year earlier.
Excluding items, earnings were $1.03 per share. On that basis, analysts on average were expecting $1.02 per share, according to Thomson Reuters I/B/E/S.
Revenue jumped 45 per cent to $12.25-billion, boosted by last year's acquisition of its North American bottling operations, price increases and a 5 percentage-point currency benefit. Analysts expected revenue of $12.01-billion.
Worldwide volume rose 5 per cent. Volume in North America also rose 5 per cent, supported by the new cross-licensed brands. Excluding those brands, North American volume was up 1 per cent.
Volume increased 7 per cent in Latin America, 2 per cent in Europe, 7 per cent in the Eurasia and Africa segment and 6 per cent in the Pacific region.