Coca-Cola (NYSE:KO) has made a turn in 2019 after five fiscal years of declining revenues. The stock lagged the S&P 500, offering only its dividend as an incentive for ownership. It speaks strongly to the loyalty that Coca-Cola has garnered over time that shares were not down more. This year, Coca-Cola is righting itself in terms of the growth story.

A shift in focus from old-school soda to things like water, flavored water, and more flavored cola options, as well as acquisitions into segments like coffee, has helped the company regain momentum heading into its third-quarter earnings report release on Friday. Through the first six months of the year, Coca-Cola's revenues are up 5% year over year to $18.69 billion. Gross profits are up 3% to $11.4 billion, while net income attributable to shareholders is up 16% to $4.29 billion. Diluted earnings per share are up a comparable 16% to $1.00 in the first half of the year.

Bottles of Coca-Cola products.

Image Source: Getty Images.

Coffee, energy drinks give company a jolt

In the second quarter, strength stemmed from success within the Coca-Cola lineup as well as from growing strength within the new coffee business. Coca-Cola completed its acquisition of Costa Coffee back in January. Headquartered in London, the coffee chain is the second largest in the world. The deal was worth $4.9 billion, taking Coca-Cola headfirst into the coffee industry.

Q2 results included the announced launch of the segment's first ready-to-drink coffee beverage. First rolled out in Great Britain, the product is anticipated to be sold in more markets through the year. Though the coffee market is increasingly competitive, the move was a wise one. I'll be very interested to see any commentary on its progress in the Q3 conference call.

Coca-Cola also hopped in on the energy drink market overseas in the second quarter. Coming to the United States in 2020, Coke Energy is planned to have four varieties, and will carry the same stimulant as about one cup of coffee. This has been an area that many are targeting, as customers look for that quick "pick me up" in the store. Starbucks has a full lineup of energy/coffee drinks for retail sale, and it seems to do quite well. I'm encouraged to see where this leads, as it could offer an entirely new avenue for growth.

Looking ahead

When Coca-Cola reports on Friday, investors will be looking to see the positive story continue. Analyst estimates are looking for earnings of $0.56 per share in the third quarter. Full-year earnings estimates are $2.10 per share. Going off of that, the stock is trading at roughly 25 times forward earnings. Ordinarily, I'd be critical of the valuation in terms of estimating the stock's ability to maintain the bullish run it has had through the first half of the year. With Coca-Cola, however, there's something else to be said.

The company has such a history of strong dividends and investor loyalty that I think the bullish case is intact. The forward P/E isn't too off base with the company's historical price-to-earnings valuations, and I think there's room to run given the right earnings. Berkshire Hathaway CEO Warren Buffett has been a fan of the stock over the long run, and so am I. Were the company not making moves in directions outside of traditional soda pop, I'd have different feelings. But Coca-Cola is being proactive.

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