By Poroma Pant

Coca-Cola Co. credited cost-cutting for a fourth quarter profit that beat analysts’ expectations.

Net income jumped 61 percent to $1.24 billion or 28 cents per share from $770 million or 17 cents per share in the prior-year period. Excluding one-time items, Coca-Cola’s earnings were 38 cents a share, a penny more than Wall Street’s estimate.

Total revenue weighed in at $10.0 billion, beating Wall Street’s forecast of $9.86 billion.

Coca-Cola Stock Price

[field name=”chart”]

Coco-Cola reported global volume increases in several of its brands including a 1 percent growth in Coke, 3 percent in Sprite and 7 percent for Coke Zero.

“Our fourth-quarter performance was a testament to the action we took as the company continued to deliver solid pricing and unit case volume growth,” Muhtar Kent,
chief executive of Coca-Cola, said in a press release.

“Importantly, this top-line growth was led by our flagship market of North America, which delivered its strongest annual performance in three years,” he added.

According to Nielsen, industry volumes for regular soft drinks in the U.S. for the 52 weeks ended Dec. 26 fell 0.9 percent.

Coca-Cola’s pricing increased by 1 percent in the quarter and 3 percent in 2015, finding success with smaller can sizes. “Our strategic focus on driving consumption in smaller package sizes is continuing to pay off,” said Chief Financial Officer Kathy Waller on the company website.

The company is expanding the smaller-package strategy globally, Chief Operating Officer James Quincey said on a conference call.
The company reported slowing growth in China, with a Coke unit growth of 1 percent compared with a 5 percent increase in the third quarter.

The company announced last week that it would accelerate its plan to shift all North American bottling plants from company-owned to franchised operations. The company said Tuesday it now plans to  accomplish that by 2017.

This “re-franchising,” which creates a drag on company earnings, marks a step change in the company’s efforts to refocus on its core business of building strong, valuable brands and leading a system of strong bottling partners, Kent said in a statement.

“The Coca-Cola Company will return to its focus as a higher margin, higher return and less capital intensive operation,” he added.

The company said a 5 percent decline in sales of Diet Coke confirms a sales shift toward in its non-carbonated beverages, including increases of 8 percent in packaged water, 6 percent in ready-to-drink tea, 5 percent in juices and 2 percent in sports drinks.

Adam Fleck, an analyst at Morningstar, wrote, “Volume from these products has climbed to about 26 percent of the company’s total from 20 percent in 2007, and we expect continued positive gains as consumers shift their preference toward juice and other still beverages.”

Analysts at Cowen & Co., who rate the stock market perform, stated, “With volume challenges persisting, and our expectation that a global industry volume recovery could take time to materialize, we do not believe that warrants a significant price target increase.” Cowen & Co. has a target of $42.

The company gave 2016 earnings guidance of $1.90 to $1.94 per share, versus an analysts’ estimate of $2.05. Analysts at UBS AG, continuing their buy rating, stated, “We expect generally positive reaction to Q4 results and refranchising plans; offset by disappointment with EPS guidance below $1.95.”

Coca Cola reported a net income of $7.35 billion or $1.67 per share for all of 2015, a 3.6 percent increase from $7.09 billion or $1.60 per share the previous year.

Coca-Cola Co. shares rose 1.52 percent to $43.30.