Tue Oct 20, 2009 1:24pm EDT
*NB Warren Buffett is Cokes largest shareholder.
By Martinne Geller
NEW YORK (Reuters) - Coca-Cola Co (KO.N) reported lower-than-expected quarterly revenue, hurt by the stronger U.S. dollar, and said a weak economy would keep consumers under pressure next year, sending shares down 2 percent.
The world's largest soft drink maker echoed comments made earlier this month by rival PepsiCo Inc (PEP.N), which also posted disappointing revenue and cautioned that it did not expect a major revival of spending in 2010.
"We expect the consumer to continue facing economic uncertainties into 2010 and for consumer sentiment to recover slowly," Chief Executive Muhtar Kent said. He added, however, that the company remains on track to achieve its long-term growth expectations.
Coke's net income was $1.90 billion, or 81 cents per share, in the third quarter, up from $1.89 billion, or 81 cents per share, a year earlier.
Excluding a charge, Coca-Cola earned 82 cents per share. On that basis, analysts on average were expecting 81 cents, according to Thomson Reuters I/B/E/S.
Net operating revenue fell 4 percent to $8.04 billion, hurt by a 6 percentage point hit from the stronger U.S. dollar, which reduces the value of overseas sales. That missed analysts' average estimate of $8.11 billion.
Overall sales by volume rose 2 percent, after rising 4 percent in the second quarter and 2 percent in the first.
Coke's growth in developing markets like India and China -- where quarterly volume soared 37 percent and 15 percent, respectively -- is helping it weather a slowdown in the United States.
Third-quarter volume rose 7 percent in Latin America, 6 percent in the Pacific region and 2 percent in the company's Eurasia and Africa segment. Volume fell 2 percent in Europe and 4 percent in North America.
The North American decline, driven by a 5 percent drop in carbonated drinks, was steeper than Stifel Nicolaus analyst Mark Swartzberg was expecting.
Noting that the decline was the steepest North America has seen in three years, Swartzberg said it was likely the cause for the 2.7 percent drop in shares of Coca-Cola Enterprises Inc (CCE.N), the largest U.S. bottler.
Coke blamed the shift of July 4th holiday sales from the third quarter last year to the second quarter this year, price competition, especially for sports drinks, and the economy.
Toon Van Beeck, senior industry analyst with research firm IBISWorld, said consumers have been trading down to private label drinks in some categories to try to save money.
Overall volume of carbonated drinks, such as Coca-Cola and Sprite, rose 1 percent in the quarter, while noncarbonated drinks, such as vitaminwater and Dasani water, rose 7 percent.
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Coke's rivalry with PepsiCo took a new turn this summer when the No. 2 soft drink maker said it would acquire its two largest bottlers in a $7.8 billion deal that led analysts to wonder if Coke might eventually have to follow suit.
PepsiCo also announced a procurement deal with brewer Anheuser-Busch InBev (ABI.BR) that allows the beverage makers to save money by buying certain goods and services together.
CEO Kent told reporters on Tuesday he was "all open and for cooperation" with other companies on back-office functions like information systems, warehousing and freight.
Regarding Mexico's FEMSA (FMSAUBD.MX), the brewer of Dos Equis beer and a bottler of Coke drinks which is in talks to sell its beer business, Kent said he would support whatever decision the company makes.
"If the family which owns the beer business feels that it is time for them to become part of a bigger system, and it's good for them, then it's good for us," Kent said.
"I think it's a pure beer play," Kent added, implying that the bottling business, Coca-Cola Femsa (KOFL.MX), would not be impacted.
UBS analyst Kaumil Gajrawala praised Coke for recently resuming its share buyback plan, strong performance in emerging markets and improving relationship with its largest bottler.
"That said, we prefer PepsiCo shares, which are currently trading at a 2 multiple point discount versus Coca-Cola," Gajrawala said.
Coke shares fell 89 cents to $53.90. Coke Enterprises shares were down 65 cents at $20.48, while Pepsi shares were down 77 cents, or 1.24 percent, at $61.28 in early afternoon.
(Reporting by Martinne Geller; Editing by Lisa Von Ahn and Derek Caney)
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