The latest earnings reports from Coca Cola Company (NYSE: KO) and PepsiCo (NASDAQ: PEP) reflected a resilient US consumer, however with changing habits. As for Coca Cola, its earnings were in line with analyst estimates while sales surpassed analyst expectations.
Pepsi Is Facing A Slowdown Across Categories
Pepsi reported its North America sales slipped about 3.5% during the last quarter of 2023 as consumers were put off by higher prices. In addition to falling North America sales, global revenues were down 0.5% YoY to $27.85 billion. In response, Pepsi lowered its guidance but remained optimistic about 2024 due to optimizing its portfolio by no longer selling unprofitable brands.
Coca Cola's Fourth Quarter Highlights
For the three months ended on December 31st, Coca Cola reported that revenue grew 7% to $10.85 billion, surpassing LSEG's estimate of $10.68 billion. Fourth quarter net income dropped from $2.03 billion, or 47 cents per share Coca Cola made during 2022's comparable quarter to $1.97 billion, or 46 cents per share. Adjusted earnings of 49 cents per share were in line with analyst estimates.
Putting aside pricing and foreign currency, unit case volume grew 2% with the beverage giant estimating that the raging conflict on the Middle East took out 1% of volume growth. Although Pepsi reported a far worse decline in North America, even Coca Cola wasn't immune to inflation that squeezed the budgets of its consumers. Coca reported a 1% volume drop in North America, while Pepsi experienced a fall of 6% in its beverage business in North America. However, Coca Cola also observed strong growth for some of its higher price point and premium segments, such as Fairlife and Core Power brands.
Guidance Impacted By Foreign Exchange Rates
For the current, first, quarter, Coca is expecting a 4% headwind from currency exchange rates on comparable revenue, with the headwind also slowing down the growth of its earnings per share. It guided for an 8% hit from currency changes during the quarter.
As for the full year, Coca Cola guided for organic revenue growth between 6% and 7% with a 4% to 5% rise in comparable earnings per share. Coca Cola warned that foreign exchange rates will impact both its top and bottom lines.
Even the mighty McDonald's (NYSE: MCD) admitted that price hikes are putting off some of its customers as generally consumers are now "more wary or weary" of pricing. PepsiCo consumers were undoubtedly put off by higher prices. But not Coca Cola's as with higher prices, the beverage giant managed to overcome a volume decline in North America.
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