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(Reuters) -Coca-Cola Co on Tuesday forecast 2023 profit growth above Wall Street expectations after edging past fourth-quarter revenue estimates, as demand for its sodas remains resilient in the face of multiple price hikes to tackle higher costs.
Shares of the company rose about 1% in premarket trading.
Coca-Cola (NYSE:KO)’s near duopoly in the global carbonated drinks market along with PepsiCo (NASDAQ:PEP) has made it easier for the company to raise prices over the last few quarters to counter higher freight, commodity and labor costs.
“The outsized pricing is driving outsized revenues,” said Wedbush Securities analyst Gerald Pascarelli.
The soda giant also saw an increase in operating margin for the first time in three quarters. It posted operating margins of 20.5% in the December quarter compared to 17.7%, a year earlier.
Coca-Cola in October warned signs were emerging of inflation taking a bigger bite out of consumer spending power, especially in Europe with categories like juices and bottled water in the region seeing a shift towards cheaper private label brands.
Pascarelli said while easing energy and natural gas costs in Europe are encouraging for 2023, demand in the region is still feeling the biggest pinch from Coca-Cola’s price increases.
Average selling prices rose 12% in the fourth quarter, the maker of Sprite and Fanta said, while unit case volumes slipped 1%.
Last week, PepsiCo said it would not raise prices of its sodas and snacks further after multiple rounds of price hikes last year.
Coca-Cola forecast full-year adjusted earnings per share to rise between 4% and 5%, compared to the average analyst estimate of 2.96% growth, according to IBES data from Refinitiv.
The company sees 2023 organic revenue growth of 7% to 8%.
The beverage maker’s fourth-quarter net revenue rose 7% to about $10.1 billion compared with estimates of about $10 billion.
Adjusted profit came in line at 45 cents per share, the first time in three years the company failed to beat expectations.
