Coca-Cola’s Report Shows Consumers Swallow Higher Prices

Key Insights

• Coca-Cola stock moved higher after the release of the third-quarter report. 
• The report indicated that consumers were ready to pay for the company’s products despite higher prices. 
• Consumer defensive stocks have enjoyed strong support in recent trading sessions, and Coca-Cola’s report may boost this trend. 

Consumers Are Ready To Pay More For Essential Products

Today, Coca-Cola released its third-quarter report, which highlighted an interesting trend – leading consumer companies maintain strong pricing power despite recession worries.

Coca-Cola reported that its net revenue grew 10% to $11.1 billon, while its adjusted EPS grew 7% to $0.69. The company managed to increase prices of its products, offsetting cost inflation. It should be noted that Coca-Cola managed to beat analyst estimates despite strong currency headwinds due to the strong dollar.

Coca-Cola noted that it would provide the full-year 2023 guidance when it reports fourth-quarter earnings. The company noted that it was “encouraged by the underlying topline momentum, and will leverage its capabilities to sustain topline growth amidst the ongoing inflationary backdrop”.

Coca-Cola’s report was released on the day when traders had a chance to take a look at the CB Consumer Confidence report, which showed that Consumer Confidence decreased from 107.8 in September to 102.5 in October.

Consumer Defensive Stocks Enjoyed Strong Support In Recent Trading Sessions

While the disappointing CB Consumer Confidence report highlighted recession risks, these risks have not materialized for Coca-Cola. Judging by the recent market action, some traders are willing to bet that consumer defensive stocks will serve as safe-haven assets if the market moves lower again.

Stocks like Walmart, PepsiCo, Costco, Dollar General, Hershey, Constellation Brands and similar names have enjoyed strong support in recent trading sessions.

The third-quarter report from Coca-Cola indicates that this move was justified. The leading consumer companies have enough pricing power to offset cost inflation. While the strong dollar presents a serious problem to multi-national companies like Coca-Cola or PepsiCo, this problem looks manageable.

Consumer defensive stocks will likely remain in spotlight this week as traders will take a look at Personal Income and Personal Spending reports, which will be released on Friday.

Personal Income is expected to grow by 0.3% month-over-month in September, while Personal Spending is projected to increase by 0.4%. These reports may have a material impact on the dynamics of consumer defensive stocks.

For a look at all of today’s economic events, check out our economic calendar.