Coco-Cola delivered organic revenue growth of 14% in the fourth quarter, reaching $11.5bn. Just under a third of the growth was driven by volume with the remainder coming from product mix and price rises.
Underlying operating profit jumped 22% to $2.7bn, ignoring exchange rate impacts. This improvement was driven largely by strong organic revenue growth.
Free cash flow declined to $4.7bn for the full year, down from $9.7bn in 2023, reflecting a $6bn payment relating to ongoing tax litigation. Net debt increased from $25.1bn to $29.9bn.
In 2025, the group expects full-year organic revenue growth of 5-6%. Underlying earnings per share (EPS) are expected to grow 8-10%, ignoring exchange rates.
The shares rose 4.2% in pre-market trading.
Our view
Coca-Cola delivered another quarter of market beating numbers over the final stretch of 2024. A strong contribution from both volume and price suggests a solid demand backdrop heading into the new year.
A key thing differentiating Coca-Cola from most other drink makers is its operating model. Rather than investing in big manufacturing plants, Coca-Cola partners with, and holds stakes in, local bottling companies in what's known as the Coca-Cola System. That allows the group to keep a lid on costs and supports its industry-leading gross margins, which hover around the 60% mark. Instead, Coke concentrates its efforts on selling the syrups themselves and marketing its brands directly to consumers.
Fundamentally, Coca-Cola is a marketing machine, and its attention is devoted to soft drinks. Coke is updating its strategy and brand portfolio to focus more on sharpening its proposition on a regional and local level, but it looks more like a refinement than a revolutionary change to us. Nonetheless, it's encouraging to see the group moving forward.
Coca-Cola's diversification has undoubtedly played a large part in its resilient sales too. The group owns other household favourites like Fanta, Sprite and Schweppes, and the acquisition of Costa Coffee put Coke in the hot beverages market for the first time. We see this as a positive add-on in a segment of the drinks market that still has room to grow.
There’s an ongoing tax dispute with US tax authorities, with a potential multi-billion-dollar payment on the line. Currently, Coca-Cola appears confident of winning the legal battle but there’s the potential for that to change in the future and any negative developments could swing near-term sentiment. In or view, the balance sheet is strong enough to absorb any negative outcome should it occur, so we don’t feel that the dispute should cause long-term investors to overlook this drinks giant.
Coca-Cola owns one of the strongest brands in the world, and there's a lot to be said for that in an uncertain environment. Given the impressive profit growth and strong balance sheet, we think this marks an opportunity to pick up a quality company at a reasonable valuation, broadly in-line with the long-term average. But investors should remember nothing is immune to ups and downs, especially in the short term.
Coca-Cola key facts
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