Coca-Cola (KO) reported second-quarter results Tuesday that showed strong worldwide volume growth of 6% led by expansion outside of the US, namely Eurasia and Africa (up 7%), the Pacific, which includes China (up 7%), and Latin America (up 6%). Demand for the firm’s brand Coca-Cola was particularly impressive in China (up 24%) and Russia (up 17%). Total revenue increased 47% (due primarily to its acquisition of Coca Cola Enterprises’ North American operations), though concentrate sales and currency contributed 6 percentage points of growth, respectively. During the period, Coke Zero delivered double-digit volume growth in North America, while Fanta showed high-single-digit expansion. POWERADE delivered 9% growth and gained share in the sports drink category, while the firm’s NOS Energy brand was up a solid 13%. Such solid volume growth translated into bottom-line expansion of 10% (on a comparable basis). We expect incremental price increases, additional synergies related to its bottler acquisition and ongoing company-wide productivity initiatives to help deflect rising commodity costs in future periods, aiding bottom-line growth. Management expects that commodities will have an unfavorable impact of about $700 million on the firm’s full year results. In all, we were quite satisfied with Coke’s performance during its second-quarter and look for the company to deliver on its long-term growth targets, with China and Mexico being key drivers. We’ll look to pick up shares of Coke under $50 per share.
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