KO Coca Cola Company

By Cara Lombardo 

Coca-Cola Co. is scheduled to report its first-quarter earnings before the market opens Tuesday. Here's what you need to know:

EARNINGS FORECAST: Adjusted earnings per share of 46 cents is the consensus of analysts surveyed by Thomson Reuters, up from 43 cents a year ago.

REVENUE FORECAST: Analysts expect revenue of $7.34 billion, down from $9.1 billion a year earlier. The drop reflects the divestiture of bottling operations.

WHAT TO WATCH:

-- DIET COKE FLAVORS: The Atlanta-based company hopes four new Diet Coke flavors including Zesty Blood Orange and Twisted Mango will help stem a slide in soda volumes. Some analysts are skeptical that drinks made with artificial sweeteners will appeal to health-conscious consumers who have moved on to flavored sparkling waters, while others say their prospects are encouraging. The company is expected to share early results from the new flavors, which it launched during the quarter in brightly colored slim cans.

-- SMALLER PACKAGING: A key component of Coke's plan to boost its top line this year involves pushing 7.5-ounce cans of soda and other downsized offerings that typically cost more per ounce. Chief Executive James Quincey has said smaller packages account for between 10% and 20% of Coke's sales by volume and continue to gain share, even as Coke's overall drink volumes were flat last quarter. Coke is aiming to increase organic revenue, which excludes currency swings, acquisitions and sales, by 4% in 2018, which some analysts say could be unrealistic.

-- REFRANCHISING: Coca-Cola is nearing the final step of its process to refranchise its North American bottling system and move to an asset-light model. It plans to close a deal to sell its Canadian bottling and distribution business in the second half of the year. Analysts have been closely tracking improvements in the company's operating margins throughout the refranchising efforts, especially as freight, labor and input costs for Coke and its competitors rise.

-- TAX LAWSUIT: Coca-Cola and the IRS are currently in U.S. Tax Court battling over a $3.3 billion tax bill related to income from the company's foreign affiliates. The dispute involves the company's transfer pricing methodology and how much it should charge overseas affiliates to use its trademarks and formulas. The trial, which concerns income from 2007 to 2009, started in March and is slated to end in mid-May, but could take longer. Coke has said that its transfer pricing methodology hasn't changed since the IRS signed off on it years ago, and it intends to pursue all available remedies to resolve the matter.

Write to Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

April 23, 2018 12:03 ET (16:03 GMT)

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