Coca-Cola's Profit Canned by Aluminum?

Coca-Cola(KO) and PepsiCo(PEP) will each report quarterly results this week, but the cola giants are battling more than each other for beverage dominance.

Coke is expected to report growth of 13.9% in second-quarter earnings to $2.7 billion, or $1.16 a share, up from year-earlier earnings of $2.37 billion, or $1.06 a share on an adjusted basis. Analysts expect revenue to surge 42.8% to $12.38 billion from $8.67 billion.

The maker of Coke, Sprite and Vitamin Water drinks, among many beverages, has been battling rising commodity costs, as have most companies in the food and beverage business. In its first quarter, Coke's cost of goods sold was up 55% year over year to $3.95 billion, or 37.5% of total revenue, up from $2.54 billion, or 33.7% of total revenue.

Recently, Coke "rung the bell on a heavyweight battle against Goldman Sachs"(GS) in a battle over its aluminum costs, noted TheStreet senior contributor Daniel Dicker.

"Coke has seen aluminum prices explode more than 13% since the start of the year, even though supplies have been running at deep surpluses inside the London Metals Exchange's network of storage warehouses," Dicker said.

The storage warehouse where Coke gets most of its aluminum is privately held by Metro International Trade Services, which is owned entirely by Goldman Sachs.

 
Pepsi, which boasts a wide roster of brands including Frito Lay, Tropicana and Quaker, is expected to grow second-quarter earnings by 20.6% to $1.93 billion, or $1.21 a share. Analysts expect revenue to increase by 10.9% to $16.41 billion from $14.8 billion.

As of earlier this year, Pepsi had been able to better manage the risk of rising commodity costs than Coke, and market watchers will pay close attention to the food and beverage maker's report this week to see if it has been able to maintain that trend. In its first quarter, Pepsi's cost of goods sold soared 22% to $5.45 billion, though the figure took up a smaller percentage of total revenue year over year. Pepsi turned to improved operational efficiencies and price increases to help offset those costs, but Chief Financial Officer Hugh Johnston conceded in April that pricing in the first half of the year "has not been what we would have liked or expected."