Q1 results lit a fire under the stock
Coca-Cola’s Q1 sales increased as more consumers purchased beverages overall. In the first quarter of 2023, the soda giant’s global sales increased by 5% to $10.98 billion, exceeding analyst expectations of $10.8 billion. The manufacturer of Coke, Sprite, or Fanta reported that the retail price of products climbed by 11%, yet worldwide volumes increased by 3%.
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With first-quarter revenues at $11 billion, the reported adjusted earnings are $0.68 a share, versus anticipated earnings of $0.65 per share. Last year at this time, Diet Coke and Minute Maid’s parent company announced 64 cents per share in profit on $10.49 billion in revenue.
Consumers don’t care, they just want a soda
Manufacturers of consumer products have increased their prices to reflect the large rises in the cost of raw materials. These difficulties were brought about by supply-chain bottlenecks caused by the epidemic and the conflict between Russia and Ukraine.
Consumers did not put up much of a fight against Pepsi and Coke, which virtually monopolized the worldwide carbonated beverages industry. The average cost of 16 cans (192 ounces or 5.5l) of Coca-Cola in the United States increased from $8.03 in 2021 to $9.30 in 2022. So far this year, it has reached $10.55.
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“With pricing expected to moderate over the course of the year, this should come in tandem with moderating levels of commodity inflation, which should help to protect profitability,” said Wedbush analyst Gerald Pascarelli.
Price increases did not entirely balance the impact of higher operational expenses. The margin is lower than last year. Prices also need to combat an increase in marketing spending, investments, and a stronger currency. All this is resulting in an operating margin of 30.7% for Coca-Cola’s first quarter, down from 32.5% a year earlier.
The outlook remains bullish
The prices are currently at the levels of December 2022, which are acting as long term resistance. With this heightened volatility, there is a fight going on between the bulls and the bears.
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The trend generally looks bullish from a mid-term point of view as the price is moving steadily upwards in the trading zone and already broken through the 200 day average. The bulls are really fighting to break through the resistance of 64.5.
The long term support appears to be 59. Bears are definitely trying to return to the starting point of this cycle and take home some profits.
Coca-Cola 1D chart, source: tradingview.com, author’s analysis