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The Coca-Cola Company (KO - Free Coca-Cola Company Stock Report), the world's leading marketer of soft drinks, posted solid first-quarter results, reflecting, in part, continued strength in the company's overseas operations. Revenues jumped 40%, to just under $10.52 billion, with the top line benefiting from last year's acquisition of an affiliated bottler's (Coca Cola Enterprises, (CCE)) North American operations (CCENA) and from a 6% increase in global volume. Excluding one-time items, share net rose 8%, to $0.86, as acquisition-related margin compression limited the bottom-line advance. Still, earnings were just shy of our $0.87 estimate and fell within management's target range.

Sales gains in China and Russia were particularly strong. Volumes increased 13% in the world's most populous nation, thanks to strong demand for regular Coke and Minute Maid Pulpy (+27%). On a comparable basis, Russian volumes surged an even more impressive 16%.

Excluding the benefit from new cross-licensed brands (primarily Dr Pepper), unit-volume sales grew 2% in North America (NA), reflecting strength in noncarbonated ("still'') beverages, most notably the sports drink Powerade (+21%) and Trademark Simply orange juice (+20%). The carbonated-drinks business (in NA) experienced a 1% (organic) volume decline. Still, it actually gained market share, as competitors suffered steeper dropoffs.

Strong global demand augurs well for Coca-Cola for the remainder of 2011. Indeed, unit-volume sales should continue to increase at a mid-single-digit clip, thanks to higher soft-drink consumption in countries like Russia, India, and China. On the domestic front, greater control of the "route to market'' should enable Coke to both better serve major customer accounts and react to shifting consumer tastes. The company also expects to still realize as much as $150 million in CCENA-related cost savings this year. On the downside, input-cost inflation is sure to be a drag, especially given that CCENA had limited commodity-price hedges in place prior to the acquisition. All in all, we look for 2011 earnings to come in at $3.85 a share, up 10% from an adjusted tally of $3.49 a share in 2010.

We remain upbeat about the company's long-term prospects, given the favorable demand environment overseas. Market opportunities in Asia remain especially attractive. In China and India, for example, per-capita consumption (PCC) of Coke products is modest, at just 20 or so individual servings a year. Comparatively, annual PCC in a more established market like Mexico is upwards of 660. Thus, we see vast opportunity for strong overseas demand to support solid bottom-line growth over the 3- to 5-year pull.


About the Company:  The Coca-Cola Company is the world's leading marketer of ready-to-serve, nonalcoholic beverages. On any given day, 1.7 billion individual servings of the company's brands are consumed by people around the globe. The Atlanta-based company currently has more than 500 wholly owned and licensed brands, including 15 that generate $1 billion or more in annual sales.


At the time of this article’s writing, the author did not have positions in any of the companies mentioned.