Why Coca-Cola (NYSE:KO) Reported 1 Percent Lower Earnings for 2Q

Although the sales of traditional coke rose in the region of North American, the company saw a decrease in the sales of diet sodas. Coca-Cola (NYSE:KO), one of the largest beverages’ makers in the world, disclosed to the press on July 22, 2014, that the sales for the second quarter have increased by 3 percent. The increase in sales partially resulted because Easter fell in April this year.

The company, despite the fact that its sales shot up by 3 percent, missed the estimates mainly because the sales of diet beverages were flat in the region of North America. The analysts at JP Morgan had predicted 2 percent sales in the North America. However, the sales remained at 1 percent and accounted for approximately 45 percent of the total earnings for the second quarter of the year 2014.

The CEO and Chairman of Coca-Cola (NYSE:KO), Muhtar Kent, said that the company needs to do more in order to increase its sales from diet soda. The CEO further commented that though the company’s decline in diet beverages has improved over the recent quarter, it is not enough.

Coke is not the only struggling company in the soda business: in fact, its biggest rival PepsiCo Inc. (NYSE:PEP) is also seeing a decrease in the sales, mainly because the consumers have become more diet and health conscious over the years.

Coca-Cola (NYSE:KO) is attributing its lower sales to inadequate marketing. The company has recently shifted to natural sweeteners: it is no longer using sugar as a sweetener in the diet beverages. The company thinks that it needs to advertise this shift not only in the North American region but in the global market as well.

The sales of the regular coke increased in the area of North America by 1 percent. The CEO of the company further said that there have been demands to introduce smaller packages of the beverage, which they are strongly considering.

In the last trading session, July 22, 2014, the shares of the company fell down by 4.2 percent and touched the figures of $40.16 following the lower than expected earnings. However, the stocks recovered quickly and came back to $41.17 by afternoon. Analyst at UBS, Stephen Powers, released a research note yesterday, calling the results a little bit disappointing.

Moreover, the company’s net income fell down to $2.60 billion with an EPS of 58 cents. The company had a net income of $2.68 billion and an EPS of 59 cents for the same quarter a year back. Coca-Cola (NYSE:KO) saw a decrease of 1 percent in its quarterly revenue. The revenue was recorded to be $12.57 billion. According to Thomson, the research firms and analysts in the market were expecting revenues of $12.83 billion with an EPS of 63 cents.

The company has a market capitalization of 181.04 billion with a price to earnings ratio of 21.92. The company, on July 22, opened its stocks at a price of $41.10 and closed at a slightly increased price of $41.19.