Both Coca Cola and Pepsico have released their Q4 and full-year 2014 results, with Coca Cola beating Q4 numbers and Pepsico returning higher than expected profits.
Coca Cola’s results triggered a rise in its shares prices, Kara Ordway, senior market analyst at www.cityindex.com.au says.
“The great news with Coca Cola is the fact it saw North American sales grow for the first quarter in four, which highlights a potential turning point for consecutive quarterly sales decline in its biggest market.
“North American sales grew by 2 percent to $5.37bn in the firms fiscal fourth quarter, which is vital considering North American sales contributes to 49 percent of total group sales. Compare this to a 10 percent drop in sales in Asia Pacific and a 2 percent decline in sales in Europe and it’s easy to see here that North American sales played a vital role in Coca Cola beating forecasts here,” Ordway says.
“Going forward there remain significant concerns over exposure to currency fluctuations internationally considering recent strength and forecast continued strength in the US dollar.
“The firm predicts currency fluctuations to generate a 5 percent headwind on net revenues and a 7-8 percent impact on profits before tax for the 2015.”
On the other hand, Pepsico delivered a “double whammy of higher than expected profits and a return of cash to investors totalling as much as $9bn,” Ordway says.
“The drinks firm saw fourth quarter core earnings per share rise to $1.12 with the market expecting around $1.08 per share. Organic revenue grew by 5 percent in the last quarter of the year and 4 percent for the year as a whole, brightening underlying prospects and comes despite growing calls from activist investor Nelson Peltz’s Trian Fund Management for the executive board to agree to dramatic changes to the firm to make it more streamlined and agile.
“From a pure numbers perspective, there is enough here to be well received by the market but it’s the return of cash to shareholders of as much as $9bn in the form dividends and share repurchases that will help even more with the digestion of their firms earnings.
“The firm seems to be gaining some solid momentum, especially with organic revenue growth growing more strongly in the last quarter of the year and this brightens medium term prospects for the company as a whole.
“One thing to warn against is the recent strength of the US dollar and the like progressive impact this will make on global sales and currency exposure. We saw dollar strength make an impact in Pepsico’s earnings this time around and with the dollar gaining even more momentum, this needs to be guarded against by investors,” Ordway says.