By Evie Liu

Despite resilient consumer demand for Coca-Cola products, a strong dollar could bring down the firm's financial results as it prepares to post fourth-quarter earnings on Tuesday before the market opens.

For the three months ended in December, Wall Street analysts polled by FactSet expect the beverage giant to post earnings of 52 cents a share, up 6% from the year-ago period. But sales are expected to decline by 2.5% from a year ago to $10.68 billion.

In the previous quarterly report, Coca-Cola easily beat estimates for earnings and sales as consumer demand for its products remained resilient even amid inflation pressures. While the average price of products sold increased 10%, unit case volume declined just 1%.

As consumer spending in North America normalizes, the firm's domestic results, which make up about 35% of its total profit, will likely accelerate, wrote Kevin Grundy, senior research analyst at BNP Paribas Exane, in a Friday note.

This owes in part to the strong growth of Fairlife, the company's premium milk and protein shake brand. Fairlife makes up roughly 5% of Coke's U.S. business, but contributed to 35% of the firm's sales growth in 2024, according to Grundy.

The analyst expects the brand to grow by 20% annually for the next five years as demand continues to increase and additional manufacturing capacity comes online.

Still, a strong dollar could pose headwinds for Coca-Cola this year and the firm already noted it in its financial forecasts. The U.S. Dollar Index, which measures the greenback against a basket of currencies, is up almost 8% since the end of September to about 108 as of January.

This is bad news for global conglomerates such as Coca-Cola that make much of their sales abroad in foreign currencies. About two thirds of Coca-Cola's revenue came from overseas markets in 2024, according to FactSet.

For the fourth quarter, management expects adjusted earnings per share to see a 10% currency headwind, in addition to a 3% to 4% headwind from acquisitions, divestitures, and structural changes. They expect the currency headwind to continue in 2025 as well.

Coca-Cola stock is up 7% over the past 12 months, but has declined 12.5% since its recent peak in September. Consumers are concerned about uncertainties Robert F. Kennedy Jr. might bring if he is confirmed as the head of the Department of Health and Human Services.

Kennedy is a fervent critic of highly-processed foods and sugary beverages, which he blames for the high obesity rate and poor health of American people. He has talked about a series of potential policies to curb the consumption of such products.

Still, Grundy thinks Coca-Cola is well positioned if the political landscape shifts, noting that 19 out of its 20 largest brands have "zero-sugar" offerings.

Write to Evie Liu at evie.liu@barrons.com

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February 10, 2025 16:15 ET (21:15 GMT)

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