The Coca-Cola Company (KO) Can Still Make Investors Happy

Understandably, investors are a little disappointed that The Coca-Cola Company (NYSE:KO) could not meet revenue expectations in the just reported second quarter. Some investors thought that risks from falling soda demand in the US as well as economic uncertainties and currency headwinds are weighing too much on the company’s prospects and chose to sell their stakes. This triggered a 1.9% decline in the stock price upon the earnings announcement.

But, some of the confidence seems to have come back as the stock has almost fully recovered the drop. Maybe the volume weakness subsequently reported by both PepsiCo, Inc. (NYSE:PEP) and Dr Pepper Snapple Group Inc. (NYSE:DPS) had something to do with it. The trends amply demonstrated that The Coca-Cola Company (NYSE:KO) had little to be blamed for —  weather woes that caused sales of beverage makers to dip universally.

So where does The Coca-Cola Company (NYSE:KO) stand now? We will take a quick look at the quarterly numbers and try to figure out if the company still has what it takes to satisfy its stakeholders.

Quarter recap

The Coca-Cola Company (NYSE:KO) saw its revenue decrease 3% to $12.75 billion and its net income topple by 4% to $2.68 billion. The company’s sales growth was affected by the unfavorable weather conditions in key markets like the US, Europe, India and the numbers were also hurt by unfavorable currency impact. plus the sale of bottling operations in the Philippines.

The company matched its adjusted earnings of $0.61 per share with analyst expectations but revenue fell short of expectations of $12.96 billion. Volumes were up just 1% lagging Wall Street estimates of 3% to 4% growth.

Market outperformer

The numbers certainly look tepid but in the key North American market The Coca-Cola Company (NYSE:KO)’s volume trends are better than rival PepsiCo, Inc. (NYSE:PEP)’s beverage volumes and also that of Dr Pepper Snapple Group Inc. (NYSE:DPS)’s. Fundamentally, soda sales in the US have been declining steadily since 1998 and in the second quarter the situation was exacerbated by the unusually wet and chilly weather.

The Coca-Cola Company (NYSE:KO)’s North American volume decreased 1% due to a 4% drop in soda sales, which offset the 5% growth in non-carbonated beverages. This reversed a streak of volume gains in 12 consecutive quarters. In comparison PepsiCo, Inc. (NYSE:PEP) saw a mid-single-digit percentage decline in soda volumes and a low-single-digit percentage decline in non-carbonated drink volumes. Dr Pepper Snapple Group Inc. (NYSE:DPS) which predominantly operates in North America saw its volumes slip by 4%.