Shares of Coca-Cola (KO) were climbing more than 3% Tuesday, as lackluster expectations were enough to turn an in-line quarter into a great one for many investors.
Coke reported first quarter adjusted earnings of 44 cents a share, in line with analysts' expectations. Revenue fell 4.2% year-over-year to $10.58 billion, just squeaking past the consensus $10.55 billion.
However, there were bright spots in the quarter: The in-line results came despite foreign exchange headwinds as a result of the strong dollar, and overall volumes rose 2%, ahead of expectations and juiced by growth in fast-growing emerging markets.
On the conference call, management said that it doesn't anticipate currency headwinds to be as severe going forward, and the company's full year plan remains intact.
Citigroup's Wendy Nicholson reiterated a Buy rating and $44 price target on the stock following the report: "KO faced its toughest YoY volume comp of the year in 1Q (to +4% in 1Q13), which had led most folks to expect 0%-1% overall volume growth in 1Q14. We are encouraged that despite a confluence of headwinds – incl. one less selling day, the shift in timing of Easter, the new soda tax in Mexico, unrest in Russia, and robust health & wellness concerns pressuring the CSDs business globally – KO managed to deliver 2 pts of global volume growth. And, while this growth was driven entirely by the stills business, we are pleased that the margin drag from the negative mix shift did not prevent KO from posting 7% organic growth in op income. All in, we consider this to be a better-than-expected start to the year, and we hope this momentum continues, especially in light of easier volume comps to come."
Main rival PepsiCo (PEP) was also trading up at recent check; it reports earnings on Thursday.
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