Coca-Cola making its biggest change since 1892 and investors love it

Brian Sozzi
Editor-at-Large

It’s a plan of attack that Coca-Cola CEO James Quincey has promoted since his days as COO: Coke must become a “total beverage company” if it wants to accelerate its growth globally. Not abandon the Coke name of course, just broaden the product portfolio in a manner not seen since its founding in 1892.

What that has meant for Coke (KO) under Quincey’s leadership is the introduction of mini cans of full-calorie soda to cater to consumers that want some sugar, but not a ton of sugar. It has meant lime-flavored Diet Coke in slim cans, because millennials are demanding flavors without the calories. It has meant signing off on a 2020 U.S. launch (at long last) on a Coke-branded energy drink that takes aim at that surging market. Coke’s new energy drink has already debuted in 25 European countries.

And of course, it has meant pulling the trigger on the $5.1 billion acquisition of Costa Coffee in 2018 to more aggressively pursue the popular java category.

While Quincey has remained reluctant to get into the unproven CBD beverage space — and snacks to compete with heated rival PepsiCo’s Frito Lay division — his “total beverage company” rallying cry continues to be embraced by investors. In large part, that’s because the efforts to cater to growing consumer demands are showing up favorably in the company’s quarterly earnings results.

Coke reported Friday that third-quarter earnings came in at 56 cents a share, in line with Wall Street forecasts. Revenue tallied $9.5 billion versus the $9.4 billion consensus estimate, fueled by strength globally in zero sugar options, juice and water. The beverage giant slightly raised its full organic sales growth guidance to 5%. It reiterated its full-year earnings per share guidance for a decline of 1% to an increase of 1%.

Dow component Coke’s stock rose about 3% on the news. The stock has gained 21% the past year, compared with an 8% increase for the S&P 500 and a 6% pop for the Dow.

Wall Street remains impressed with Quincey’s pursuit of beverage innovation.

“CEO James Quincey, in our assessment, remains highly aggressive in his approach to building a total beverage company,” says veteran Guggenheim Securities beverage analyst Laurent Grandet. “Today’s 3Q results provide yet another quarter of evidence that Coca-Cola’s strategy to drive top-line growth is working and gaining momentum.”

Grandet expects Coke’s energy drinks to pull in a cool $200 million in sales next year.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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