Key Points
Coca-Cola is proving that its beverage line is growing in popularity.
The company's global strategy delivers results.
Coca-Cola (NYSE: KO) has been around for a long time -- 140 years -- and is about as familiar as it gets. It's a classic blue chip stock, providing stability, reliable profits, and even a great dividend. Those are traits that investors appreciate, but they're nothing that generates a jaw-dropping moment.
But these are also interesting times -- there are concerns that the artificial intelligence (AI) market is developing an unsustainable bubble, and investors may start looking for safe, reliable picks for some safety.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
The global beverage giant will report third-quarter earnings on Oct. 27, and I think the stage is set for Coca-Cola to remind investors that there's nothing wrong with bubbles -- as long as they're in carbonated drinks that are loved around the world.
Coca-Cola stock trades up about 33% so far this year, and after raising its full-year guidance in July, I think another strong earnings report could send Coca-Cola stock higher.
Image source: Getty Images.
Coca-Cola's business is picking up steam
Coca-Cola is proving that its line of beverages, which includes soft drinks, coffee, tea, sports drinks, water, dairy products, and juices, is growing in popularity -- and adding to the company's bottom line.
In the second quarter, Coca-Cola reported $13.4 billion in revenue, up 7% from a year ago. And global unit case volume, a measure of beverage sales, increased by 5%. In short, consumers are actually buying more products, rather than the company simply charging more for the same amount of soda.
Coca-Cola Zero Sugar volume increased 16%, while sports drinks, water, and tea all recorded gains. The company also gained market share in the global nonalcoholic ready-to-drink beverage market.
Those results helped Coca-Cola record adjusted earnings per share of $0.97, up 11% from a year ago.
The global strategy delivers results
Coca-Cola has another advantage that investors shouldn't overlook -- its international distribution network. In Q2, it used the FIFA World Cup to promote its brands in more than 180 markets. Coca-Cola says the campaign contributed to 5% volume growth for its flagship brand and 8% for Powerade.
It's also adapting products to local preferences, including lemon-flavored Sprite+Tea in China and expanding Coca-Cola Zero into additional international markets. Unit case volume was up 8% in Asia Pacific during the second quarter, while North America and Latin America were both up 3%.
Expect another strong quarter
Coca-Cola raised its full-year outlook after reporting second-quarter earnings. Management forecast organic revenue growth of 5% and adjusted EPS growth of 9% to 10%, up from its previous range of 8% to 9%. The company also increased its projected free cash flow to $12.4 billion.
Coca-Cola has spent decades building a global distribution network and a portfolio of recognizable brands. Now it's using those advantages to sell more beverages, reach new consumers, and improve profitability.
That combination could give investors another reason to buy the stock when Coca-Cola reports on Tuesday, Oct. 27.
Patrick Sanders 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.