Coca-Cola's Net Rises 8.8% on Water, Overseas Sales (Update2)
Coca-Cola's Net Rises 8.8% on Water, Overseas Sales
July 21 (Bloomberg) -- Coca-Cola Co. said second-quarter profit climbed 8.8 percent, topping analysts' estimates, on sales of Powerade sports drinks in Latin America and Europe and diet sodas in the U.S.
Net income at the world's largest soft-drink maker rose to $1.72 billion, or 72 cents a share, from $1.58 billion, or 65 cents, a year earlier, Atlanta-based Coca-Cola said in a statement. Sales jumped 6.7 percent to $6.31 billion, the biggest gain in more than a year.
Sales of Dasani bottled waters jumped 34 percent and Powerade sports drinks 23 percent, helping Coca-Cola catch up with PepsiCo Inc., the leader in noncarbonated drinks. International sales surged 7 percent and North America posted its first gain in a year after the company introduced diet sodas including Coca-Cola Zero.
``A new management team is allocating more money for advertising spending for branding,'' said Michael Bee, who helps manage $3.3 billion for Cleveland-based Boyd Watterson Asset Management, including 100,000 Coca-Cola shares. ``The company is addressing issues that have plagued it for five years.''
Coca-Cola was expected to earn 64 cents a share, the average of 16 analysts surveyed by Thomson First Call. Coca-Cola had beat estimates the past six quarters.
PepsiCo said July 12 that second-quarter earnings rose 13 percent and revenue climbed 8.9 percent because of surging demand for noncarbonated drinks led by Gatorade in Europe and Asia and Quaker foods in the U.S.
Coca-Cola Zero
Shares of Atlanta-based Coca-Cola were unchanged at $43.33 in New York Stock Exchange trading. Shares have fallen 14 percent in the past year, compared with a 6.5 percent gain for Purchase, New York-based PepsiCo.
Chief Executive E. Neville Isdell introduced Coca-Cola Zero and Diet Coke with Splenda at discount prices of 99 cents for a 2-liter bottle and with newspaper and direct-mail coupons. The promotions helped Coca-Cola gain sales from PepsiCo since May, said Morgan Stanley analyst Bill Pecoriello.
Isdell, 62, is also bringing out new advertising including a version of its 1971 ''Hilltop'' commercial to introduce Coca-Cola Zero. Spending on U.S. ads increased 27 percent to $185 million in the first four months of the year, with expense for diet drinks more than tripling, according to TNS Media Intelligence, which tracks spending. PepsiCo's spending on soft drinks rose 9 percent to about $90 million.
While Coca-Cola leads the diet-drink market, more younger consumers are switching to bottled water, sports drinks and juices, all markets led by PepsiCo. Coca-Cola gets 83 percent of its sales from soft drinks including Sprite and Fanta, while PepsiCo gets less than 20 percent. PepsiCo sales have risen an average of 7.5 percent the past five years, compared with 2.1 percent for Coca-Cola Co.
Because of its faster growth, fifteen analysts rate PepsiCo as a ``buy,'' and three as a ``hold.'' By contrast, 11 analysts rate Coca-Cola as a ``buy,'' 11 rate the stock as a ``hold'' and one as a ``sell.''
To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net.
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