Coca-Cola shares up after better than expected profit

City A.M. Reporter
Coca-Cola has posted slightly better-than-expected earnings on strength in emerging markets despite a slowdown in sales in north America.

The world's largest soft-drink maker, with brands including Sprite, vitaminwater and Powerade, does the majority of its business outside the US - an asset that has kept it in favor with investors despite home market struggles, where anaemic jobs growth has dulled sales of soft drinks.

At the same time, volatility in commodity markets has led to increased costs for packaging, sweeteners and fruit.

Atlanta-based Coke said it raised prices in North America one to two per cent in the quarter, and it remains committed to three per cent to four per cent increases in the second half of the year to help offset those costs.

But Morningstar analyst Philip Gorham said raising prices again could be difficult, given the delicate state of consumer spending following weak US jobs growth in June.

"Pricing should be led by the consumer, but the trouble is the consumer, particularly at the low end, is driven by unemployment, which is back up," Gorham said. "I just don't think the environment is right to raise prices."

Coke reported net income of $2.8bn (£1.7bn), or $1.20 per share for the second quarter that ended on July 1, up from $2.37bn, or $1.02 per share, a year earlier.

Excluding one-time items, earnings were $1.17 per share, topping analysts' average estimate by a penny.

Revenue jumped 47 per cent to $12.74bn, fueled by last year's purchase of North American bottling operations, price increases and a six per cent benefit from foreign exchange rates.

Analysts were expecting revenue of $12.38bn.

Coke's shares rose 2.2 per cent, or $1.54, to $68.66 in early New York Stock Exchange trading.