Coca-Cola is a stable safe haven in a tough market

New York
CNN Business
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With so many worries – inflation, covid, interest rates, Ukraine, stock volatility – Consumers are willing to pay a premium when looking for convenience in the form of sweets like Coca-Cola. Investors are looking for a safe haven in the company’s shares.

Coca-Cola reported first-quarter earnings and sales Monday that easily beat expectations: Sales rose 16% to $10.5 billion, beating Wall Street expectations of $9.8 billion. Earnings of $2.8 billion, or 64 cents a share, are up 24% from a year ago — topping the consensus estimate of 58 cents a share.

Rising prices were a major driver of the strong numbers. Coca-Cola said its price/mixture, a measure of how much it charges customers, rose 7% globally and 11% in North America.

Coca-Cola shares

(KO) It rallied a bit Monday morning on the back of strong results, even as the broader market fell again after that Massive slip on Friday. The company also reaffirmed its outlook for the rest of the year – despite inflation concerns that have pushed up prices for aluminum and other commodities used by Coca-Cola.

“The overall inflationary environment will be here for a while. For how long, no one knows,” Coca-Cola Chief Financial Officer John Murphy said in an interview with CNN Business Monday morning.

The pressure on commodity prices and wages will continue, Murphy said. But he added that the company has the flexibility to raise prices, especially as it offers more premium products.

However, Coca-Cola recognizes that some consumers feel more uncomfortable with higher prices than others.

That’s why CEO James Quincey said during a conference call with analysts Monday that the company is testing refillable packaging in Latin America and Africa and returnable glass bottles in parts of the southwestern United States.

Quincy said the goal of these initiatives is to reduce waste and give consumers financial incentives to use reusable bottles.

Murphy added that Coca-Cola should “earn the right” to raise prices with it continuous innovation And making sure it tops the changing trends.

To this end, Coca-Cola has been busy with development quirky new flavors – and eliminate some old favorites Like Tab, which was one of hundreds of brands that closed Coke in the past two years – the company is trying to survive Relevant to younger consumers.

“When I look back on the last couple of years, one of the biggest results was that we used that time to clean out the closet. Now we’re building it again,” Murphy said. “It’s important to stay disciplined and keep a close eye on which brands are doing well. We need to keep the portfolio abstract. ”

Investors are happy with this strategy. Coca-Cola stock has now gained 11% so far in 2022 – making it one of the best-performing companies in dawThat’s down 8% this year.

Traders flocked to consumer staples companies such as Coca-Cola as they provide stability in sales and profits at a time of geopolitical turmoil and concerns over rising Fed rates and inflation. Coca-Cola also pays a fixed dividend yield of approximately 3%.

Berkshire Hathaway

(BRKB)the company led by Warren Buffett – known as a huge fan of the company, as well as Cherry Coke – is Coke’s largest shareholder with a stake of more than 9%.

The Coca-Cola Company continues to perform well internationally even as the recent surge in Covid-19 cases is worrying investors. The company’s sales jumped 34% in Latin America and 13% in Europe, the Middle East and Africa.

As part of its global strategy, Coca-Cola continues to invest heavily in emerging markets, Murphy said.

“We have to stay close to these markets and adapt as necessary,” Murphy said. “Investing in volatile times will allow you to win.”