Image courtesy flickr user "Wrote" under Creative Commons license.

The Coca-Cola Company (KO 0.15%) on Wednesday reported a quarterly decline in revenue due to foreign currency pressures, but higher net income on a gain from its recently concluded distribution and equity transaction with Monster Beverage Corporation.

The company's second-quarter 2015 revenue of $12.2 billion represented a 3.3% drop from the same quarter last year. Net income increased 20%, to $3.1 billion, resulting in diluted net income per share of $0.71 versus $0.58 per share in Q2 2014. Below, I review key highlights from today's report.

Currency continues to weigh on Coke's brands
Coke is one of the most recognizable brands globally, but the company's decades-long push to extend its reach to more than 200 countries is currently impacting revenues and earnings. The U.S. dollar has gained more than 22% against other major currencies since the start of its rally one year ago. Coca-Cola derives just more than half of its revenues from overseas.

In the just-reported quarter, foreign currency effects decreased reported revenue by 7%, operating income by 11%, and earnings before taxes by 6%. Management today maintained its estimate that foreign currency headwinds would drag on full-year revenue by 6%. But it revised the estimated negative full-year effects on operating income -- from 10% to 11% -- and income before taxes -- from 7% previously, to a new range of 7%-8%.

Coca-Cola's unanticipated pricing power
Perhaps the biggest surprise in today's earnings report was the strength Coca-Cola exhibited in its North American business segment. The segment recorded a 3.5% revenue increase, propelled by a 4% increase in pricing and product mix. This is significant for several reasons.

First, it demonstrates that Coke's largest market by far, North America, which alone accounted for more than 48% of company revenue in the quarter, is capable of providing a tangible offset to global currency-induced revenue weakness. For a consumer goods company, a 4% price bump within a single quarter is quite aggressive. Consider that, year to date, the Consumer Price Index (CPI) "All Urban Consumers" index records food inflation at just 1.8%. Price increases by Coca-Cola in North America are denominated in U.S. dollars, so they create a more tangible impact on both the top and bottom lines.

Second, the pricing power validates two strategies Coca-Cola has employed during the past few quarters. The company's productivity plan calls for a savings of $3 billion annually by 2019. Part of this savings is being redirected to greater marketing spends, and it appears that the move toward intensified marketing is paying off.

Coke has also utilized a packaging reduction strategy -- that is, selling smaller packages of its drinks, such as the 7.5 ounce "Coke Mini" bottles, at higher unit prices. Packaging reduction can function as an under-the-radar price lever, but health-conscious consumers who enjoy the taste of Coke  -- and welcome smaller serving sizes -- don't seem to mind.

The company also cited volume growth of 4% in still (non-carbonated) beverages as a factor behind the North American segment revenue boost. Specifically, Coca-Cola pointed to double-digit growth in its "smartwater," "Gold Peak," and "Honest Tea" brands as key "still" volume drivers during the quarter.

A "Monster" boost to this quarter's net income
Last month, Coca-Cola completed its transaction with Monster Beverage Corporation, begun in 2014, in which Coke took an equity stake of 16.7% in Monster. Additionally, in exchange for transferring its energy drink portfolio to Monster, which in turn transferred its non-energy drink portfolio to Coke, the company gained the right to distribute Monster's extremely popular energy drinks throughout its global system.

Closing the transaction resulted in a one-time, $1.4 billion gain in Q2 2015, reduced by impairment charges of $380 million related to energy drink rights given up, for a net $1.0 billion boost to net income. The deal appears to be a tangible win for Coke, as it has already recorded a gain on its books of nearly one-half the total deal size of $2.15 billion. 

Selling Monster's energy drinks worldwide should support Coca-Cola's volumes as it seeks expansion into new categories beyond its flagship carbonated soft-drink brands. In today's report, the company revealed that the expanded distribution of Monster's beverages contributed a full percentage-point increase to North American unit case volume for both the quarter and year to date. That would account for half the total increase in the quarter, and the total year-to-date increase for the entire segment.

Deals like this, which open opportunity in relatively new, fast-growing segments of the beverage industry, increasingly hold the key to Coke's future.