Coca-Cola Company a few hours ago reported a 28% drop in its adjusted quarterly revenue as sales of its soda drinks plummeted by the closure of sporting venues, theaters, restaurants, due to lockdowns to contain the deadly rampaging virus.
The Atlanta based company makes more than 50% of its revenue by selling global soft drinks brands like Fanta, Sprite and concentrates to restaurants and hospitality businesses, such as America’s food juggernaut, McDonald’s Corp but most of them had closed most of their operation under fiscal authorities – mandated restrictions in limiting the spread of the deadly virus.
“We believe the second quarter will prove to be the most challenging of the year; however, we still have work to do,” Chief Executive Officer James Quincey said in a statement.
Should you buy the stock? Coca-Cola has been facing a lot of pressure lately in spite of being the world’s most popular soda maker. This growing concern strengthened as a lot of its consumers tend to buy a lot of soda when they see movies, eat out, or attend parties with the present macros, Coca-cola revenues seem to be heading south in the mid-term.
However, the soda maker shocked stock traders by reporting a massive improvement in its away-from-home sales, which typically make up 50% of its revenue showing the global brand still commands a force in the world’s soda market. The stock trading at around $46 seems attractive for value investors with its price-to-earnings (P/E) ratio of around 22.6, showing more room for upside run to the $60 recorded during the pre-pandemic era.
Coca-Cola earned 42 cents per share, beating stock analysts’ average estimate of around 40 cents.
Unit volume, a key measure that indicates demand, declined 16%, with Coca-Cola falling 7% and sparkling soft drinks tumbling 12%.
The Atlanta-based company reported adjusted revenue of $7.18 billion for the second quarter ended June 26, largely in line with Wall Street estimates according to IBES data from Refinitiv.