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Coca-Cola's finest estimates as value reductions offset the pandemic gross sales decline

Coca-Cola said Wednesday that the coronavirus pandemic is still affecting sales, but efforts to cut costs have helped beat analysts' earnings estimates.

The company also released its first forecast since the crisis hit its business. Analysts appear more optimistic than the soft drinks company about the speed of its recovery.

The company's shares rose nearly 2% in premarket trading.

The company reported, relative to Wall Street expectations based on an analyst survey by Refinitiv:

Earnings per share: 47 cents, adjusted versus 42 cents expected Revenue: $ 8.6 billion versus $ 8.63 billion expected

The beverage giant reported fourth-quarter net income of $ 1.46 billion, or 34 cents per share, compared to $ 2.04 billion, or 47 cents per share, a year earlier.

In response to the pandemic, Coke accelerated workforce restructuring and downsized the portfolio. The company recorded a $ 15 million charge related to these efforts and a $ 4 million benefit from discontinuing its Odwalla brand. Approximately 11% of Coke's global jobs were lost, excluding the Bottling Investment and Global Ventures segments. Coke expects to spend $ 350 million to $ 550 million on severance payments.

Excluding restructuring costs and other items, Coke earned 47 cents per share, beating the analysts polled by Refinitiv, 42 cents per share.

Net sales declined 5% to $ 8.6 billion, falling short of expectations of $ 8.63 billion. Organic sales, which exclude the impact of acquisitions, divestitures, or foreign currencies, decreased 3% in the quarter.

The unit volume, which excludes the effects of foreign currency and pricing, decreased by 3%. All four beverage segments saw volume declines and Latin America was the only geographic region to see volume growth.

The company said the global recurrence of the virus in December and January put pressure on demand. So far, the global volume in February has declined in the mid-single-digit range.

"The progress we made in 2020, including actions taken to accelerate the transformation of our business, gives us confidence that we will return to growth in the year ahead," said CEO James Quincey in a statement. "While the short-term uncertainty persists, we are well positioned to come out of the crisis stronger than before."

In the fourth quarter, the volume of sparkling soft drinks decreased by 1%. The soda of the same name saw 1% volume growth over the reporting period, and Coke Zero Sugar's volume rose 3%.

In the company's juice, dairy and plant-based beverages segment, volumes were down 2%. While Coke & # 39; s Simply Juice and Fairlife Milk performed well, they weren't enough to offset a decline in the Minute Maid Wells business.

The volume of water, improved water, and sports drinks decreased by 9%. However, the tea and coffee business saw the largest volume decline. Demand was down 15% mainly due to pressure on the Costa cafes and Dogadan tea brand in Turkey.

Coke expects organic sales growth in the high single digits and adjusted earnings growth in the high single digit to low double digit range in 2021. The forecast of the analysts for the full year result of 10.5% was at the upper end of the range.

Coke cautioned that first quarter results will include 2% currency headwinds based on current rates, but did not provide specific estimates for the period.

The company also provided the IRS with an update on its ongoing litigation. A U.S. tax court said in November that Coke will have to pay the majority of its $ 3.4 billion tax bill. The company said in its earnings report that it "believes it will eventually prevail". Coke has calculated that its potential liability could be up to $ 12 billion, in addition to a 3.5% increase in the underlying tax rate.

Read the full report here.

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