Commodities Costs Cut Into Coca-Cola (KO) Earnings

I wrote earlier today about how this summer’s drought has been good news for soft commodity investors. But it’s been a nuisance to companies like Coca-Cola (NYSE: KO).

That much was clear today during the soft-drink giant’s second-quarter earnings report. Higher commodity costs weighed on Coke’s profit margins, and pushed its earnings down a hair from the same quarter a year ago despite 5% revenue growth.

Coke contains ingredients such as corn syrup and sugar that have become quite expensive over the last month. The worst drought since the 1950s has pushed the prices of most soft commodities through the roof.

Corn is up 43% since mid-June. Sugar has gained 21% this month.

That helped push earnings down despite a 1% rise in sales volume.

Though Coke’s earnings dipped a bit, they were still better than what analysts were forecasting – pushing the stock up 1.6% on Tuesday.

Better times are likely ahead for the world’s largest beverage maker. Coke is one of 10 official corporate sponsors of this year’s London Olympics, which open next Friday. That means plenty of Coke ads will be running during the 17-day event that’s sure to be seen by billions of people around the globe.

Seventy percent of the world’s population tuned into the last summer Olympics, held in Beijing. Coke shares rose nearly 3% that summer as a result.

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