Shares of Coca-Cola tumbled Tuesday after the soft-drink giant blindsided Wall Street with a warning that sales would decline in the first quarter.
Blaming weak economies overseas, the Atlanta-based company said after the stock market closed Monday that case-volume sales would fall 1 percent to 2 percent in the first three months of the year. Analysts had been expecting an increase of 1 percent to 2 percent.
The company's warning also prompted several brokerages to lower their earnings forecasts and downgrade the stock (KO), and the issue, a component of the Dow Jones Industrial Average, fell 2 9/16, or 4 percent, to 62 1/4.
Ironically, if the Coke news had been released before the market closed Monday, the Dow almost certainly would not have closed above 10,000 for the first time. While the Dow dropped 92 to 9913, all but one component, IBM (IBM), were pulling the blue-chip index lower.
Coke's case-volume sales, a key indicator of how well the company is doing, have been struggling for much of the past year amid a sharp slowdown in many foreign markets, particularly Asia and Latin America. Currency devaluations have also cut into results. Coke derives about three-quarters of its profit outside the United States.
Analysts have been ratcheting down projections for case-volume sales over the past six months, but Monday's warning still came as a shock. Particularly disappointing, analysts say, is the tepid 2 percent increase the company expects to eke out in U.S. sales. They blame what they call an ill-timed price increase for the slower domestic sales.
Just two months ago, Coke told analysts it was aiming to boost worldwide case volume by 7 percent to 8 percent. While Wall Street was skeptical it would achieve that goal, the latest warning almost certainly means the company will fall significantly short unless there's a rapid improvement in economic growth overseas.
As a result, analysts are busy shaving per-share projections for 1999. Coke had been expected to earn $1.47, according to the consensus estimate of analysts surveyed by First Call Corp., but many are revising the figure down to about $1.40.
Coke hasn't seen annual sales decline since 1954.
Written By Jeffry Bartash, CBS MarketWatch