Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



What to Think of Coke's Latest Trends

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Coca-Cola's (NYSE: KO  )  recent earnings report had two main themes: The emerging markets are delivering robust growth and the Western markets are starting to slow down. The first element is most important, as the company's global business had experienced some slowdown prior to this quarter. With double-digit growth in China and solid growth in areas throughout Latin America and Asia, things appear to be back on track and in line with management's goals. The latter element, while it's disheartening to witness a more than 100-year-old Western icon lose some of its fizz, is part of a natural cycle. Investors concerned about the growth prospects for Coca-Cola are looking at the wrong picture. This isn't a global growth play; it's a steady-as-she-goes income generator.

Emerging wins
Developing and emerging markets posted 3% growth in volume, led by 12% in China and mid-single-digit gains in Russia, India, and Brazil. Driving these gains are increased brand penetration and a focus on cold, sparkling drinks.

With successful marketing campaigns, such as the Sochi Olympics, Coke is gaining traction in various parts of the world despite its already massive presence on the global scene. Management noted that the Sochi activation delivered 9% volume growth for Coke in Russia.

North American sparkling beverage volume was flat, though price mix was able to eke out a gain of 2%. Many analysts discussed the trend that a more health-conscious population is leading to less sugary soda consumption -- and it's true. The company will have a hard time switching the trend, too, as it's not a matter of too many calories. Diet soda consumption is on a downward slope, as well. European volume fell 4%.

While it may seem like a fundamental problem -- to have downward pressure on the core product -- it really won't keep Coca-Cola down in the long run.

Plenty to go around
Keep in mind that still beverages account for one-quarter of Coca-Cola's sales today. This is far from a soda pure play. Juice brands such as Simply are posting double-digit growth in North America, while tea brands Honest Tea and Gold Peak are growing double-digits as well.

Even Minute Maid Pulpy, an unattractive sounding product, grew its volume 8% in China.

Coca-Cola's net revenue gain, adjusted for currency differences and excluding structural changes, grew just 2%. Its bottom-line adjusted comparable earnings grew 5%. This is about what investors should expect from the beverage juggernaut. And while shares traded significantly higher, the appeal of Coca-Cola is not necessarily its potential for capital appreciation.

The advantage of owning Coke stock is in owning a world-class management team running a world-class distribution and marketing business -- unparalleled, really. The reward to investors is a company that will slowly and steadily increase its value over decades, and keep investors happy with a comfortable dividend yield in the short term (3.2%, currently). Coke's business will never sink overnight, and investors can be just as informed glancing at the stock every year as they would every month. The West's new love for living longer and healthier lives will not bring down this ultimate anchor stock.

The greatest thing Warren Buffett ever said
Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2918170, ~/Articles/ArticleHandler.aspx, 9/4/2015 3:02:20 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Michael Lewis

Michael is a value-oriented investment analyst with a specific interest in retail and media businesses. Before coming to the Fool, Michael worked with private investment funds focusing on deep value and special situations. Currently living in the media capital of the world--Los Angeles, California.

Today's Market

updated Moments ago Sponsored by:
DOW 16,059.69 -315.07 -1.92%
S&P 500 1,917.69 -33.44 -1.71%
NASD 4,668.51 -64.99 -1.37%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 2:46 PM
KO $38.44 Down -0.72 -1.84%
Coca-Cola CAPS Rating: ****