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Coca-Cola (NYSE:KO) has been a favorite stock of Warren Buffett's for many years. In fact, Buffett-led Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) owns a 9.2% stake in the beverage giant, worth about $17.4 billion -- it's the company's third-largest stock investment.

When Coca-Cola reported its second-quarter earnings, the market was disappointed thanks to lower-than-expected revenue and a reduced full-year forecast. Despite that, Coca-Cola still makes good sense as a long-term investment, and now the stock has gone on sale.

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Coca-Cola's second quarter report was disappointing

First the good news: Coca-Cola beat earnings estimates. Excluding certain one-time items, Coca-Cola earned $0.60 per share, $0.02 higher than analysts were expecting.

Aside from that, there were a few major items from the report that left the market disappointed. First, Coca-Cola's revenue dropped 5% year over year and missed analysts' expectations, with sales falling in every one of Coca-Cola's regional units except North America.

Perhaps even more significantly, Coca-Cola lowered its expectations for the rest of the year. The company cut its forecast of organic revenue growth to 3% from the previously stated range of 4%-5%. And, the company now expects full-year EPS in the range of $1.86 to $1.92 per share, versus analysts' previous expectations of $1.94.

But, think of the big picture

Was Coca-Cola's second-quarter report disappointing? Absolutely. However, that doesn't necessarily change anything about whether or not Coca-Cola is a solid long-term investment. Coca-Cola President and COO James Quincy had the following points to make when asked about the company's earnings report:

  • Reported revenue was down 5%, but this was mainly due to foreign exchange headwinds as well as costs related to the ongoing re-franchising efforts. Organic revenue grew 3% globally, and at an even better 4% rate in the company's core operations.
  • Speaking of the re-franchising efforts, the company announced its intention to re-franchise 100% of its North American bottling territories by the end of 2017, which would effectively reduce the volume sold through company-owned bottlers from 18% to 3%, in line with the company's long-term strategy. Quincy wants investors to know this plan is still on track.
  • In response to the decline in global sparkling volume, Quincy said a lot of the problem was caused by macroeconomic conditions in places such as China, Argentina, and Venezuela. Obviously, this sort of issue is out of the company's control. "We've lived through cyclical downturns before and understand how to manage the business," said Quincy.
  • The reduction in the company's full-year organic growth forecast, one of the primary reasons for the negative reaction to the earnings report, was also primarily driven by macroeconomic issues in international markets. Again, a temporary issue.
  • Despite the public's perception, sparkling beverages are not falling out of favor. In fact, sparkling beverages remain the No. 1 growth driver in the global nonalcoholic ready-to-drink beverage industry.
  • Having said that, Coca-Cola is aggressively working toward expanding its product offerings. Since 2000, the percentage of Coca-Cola's business coming from still (non-carbonated) beverages has increased from 10% to 30%, and it has grown into the No. 1 still beverage company in the world. And, with recent acquisitions, the company is showing no signs of slowing down its product diversification plans.

The overall point is that while the quarter was a bit disappointing, none of the issues are permanent, nor are they a sign of weakening in the company's core drivers of long-term growth.

We love when great businesses go on sale

Coca-Cola is still an excellent business and a long-term winner, despite any short-term headwinds like those mentioned here. While a 3% haircut may not sound like a fire sale, consider Warren Buffett's famous quote: "It is far better to buy a wonderful business at a fair price than a fair business at a wonderful price." And Coca-Cola is a wonderful business whose price tag just got a little more attractive.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.