Shares were up 1.5 percent in premarket trading on Wednesday, but fell slightly afterwards. Adjusted earnings per share was 59 cents, against FactSet consensus of 57 cents. Revenue rose at $9.7 billion, ahead of the forecasted $9.65 billion.
But net income for second-quarter was at $1.37 billion or 32 cents per share, compared to $3.45 billion or 79 cents per share during the same period in the previous year. Revenues declined 16 percent, compared to last year’s 60 cents on $11.5 billion. Worldwide sales volume was mostly flat; juice, dairy and organic beverages sales rose only 3 percent. Sales for tea and coffee were up 2 percent, and sales for water and sports beverages inched up 1 percent.
According to the Atlanta-based beverage company, sales were heavily affected by unfavorable currency exchange and ongoing bottling franchising.
Coca-Cola, the world’s largest frizzy drinks maker, has been undergoing major operational changes. The company is currently divesting cold-fill bottling operations in the U.S. and is targeting to complete reorganization by the end of 2017. Because of these efforts, the beverage giant had anticipated a decline in profits. For the second quarter, the company had incurred a $653 billion charge due to refranchising.
“Our second quarter results demonstrate continued progress against the strategic priorities we have laid out to accelerate the transformation of our business into a total beverage company with balanced growth across a consumer-centric portfolio,” Coca-Cola CEO James Quincey said in an earnings statement.
Quincey is the former chief operating officer of Coke and succeeded Muhtar Kent as CEO in May. The second quarter report is Quincey’s first earnings report as CEO of Coke.
“Not only did we see strong performance during the quarter in rapidly expanding areas of our company, such as our innocent juice and smoothie business in Europe, our organic revenue growth in sparkling soft drinks was led by innovation in and marketing support for our low- and no-sugar options like Coca-Cola Zero Sugar, which continues to roll out around the world,” Quincey added.
Part of the company’s operational overhauls includes prioritizing the development of new products as it plans to diversify to low-sugar sodas. Coca-Cola announced on Wednesday that it would no longer sell its Coke Zero products in the U.S. and replace it with Coca-Cola Zero Sugar instead. Coke Zero Sugar is a calorie-free soda with a better-tasting recipe.
“We’ve used our in-house innovation capabilities to make the great taste of Coke Zero even better and a lot like a Coke,” Stuart Kronauge, business unit president for U.S. operations and senior vice president for Marketing, said in a statement. “To achieve this, we optimized the unique blend of flavors that gave Coke Zero its real Coca-Cola taste in the new and improved Coca-Cola Zero Sugar recipe. It’s delicious, refreshing and our best-tasting zero-sugar Coca-Cola yet.”
The company said it tested the new recipe with U.S. consumers for over a year to make sure that the introduction to the new product will be seamless. The new Coca-Cola Zero Sugar will be released in supermarkets in August. The new brand was already introduced in 25 markets worldwide last year, including Mexico and Brazil.
Despite its net income decline, some analysts remain optimistic about Coke’s performance. “Within the [macroeconomic] backdrop we’re in today, I think Coke’s results are actually promising,” Nik Modi, analyst at RBC Capital Markets, said in CNBC’s Squawk Box on Wednesday. “As they refranchise, we’re seeing improvement in volume because of better execution.”
Coca-Cola is now expecting full-year earnings per share to be flat or down 2 percent form $1.91 per share in the previous year. Previous earnings outlook was down 1 percent to 3 percent. So far, shares are up 9.1 percent for the year, while the S&P 500 index is also up 10.6 percent for the same period.
Coca-Cola stock closed Wednesday at $45.74 per share, up 1.1 percent.