Shareholders of Coca-Cola Consolidated(NASDAQ: COKE), the largest Coca-Cola(NYSE: KO) bottler in the country, had a great week this week. The stock gained 11% through Thursday trading compared to a 1.2% rally in the wider market, according to data provided by S&P Global Market Intelligence. That boost was just enough to put shares back in positive territory for the year, although the stock is still trailing the S&P 500's 9% increase to date in 2024.
This week's spike was powered by the company Q1 earnings update, which contained good news on the most recent operating trends.
Sparkling news
Coca-Cola Consolidated posted modest sales growth for the Q1 selling period that ran through late March. Revenue rose 1% thanks to rising sales volumes for both sparkling and still drinks.
Coke achieved a bigger profit boost as well, lifting profitability. Operating profit margin jumped to 13.5% of sales from 13.1% of sales a year ago. "Our solid...results build on the improved profit margins and strong cash flow we achieved in 2023," CEO Frank Harrison said in a press release .
Investors were also pleased to hear that the company is repurchasing $3 billion of its stock, which is a huge commitment given Coke's market capitalization of below $9 billion.
Shareholder returns
The stock buyback will require new debt and will also erase much of Coke's cash holdings that currently sit near $600 million. But management says the move is worthwhile, as it will boost earnings per share and reward current shareholders. "We believe this is an ideal time to leverage the strength of our balance sheet by taking on a prudent amount of debt," Harrison said.
The stock buyback doesn't change the value of Coca-Cola Consolidated and in fact might pressure earnings slightly because of higher interest expenses. But it's still a shareholder-friendly move that confirms management's intention to reward Coke's investors.
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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
