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The Coca-Cola Company (KOFree Coca-Cola Stock Report) delivered a solid performance for its September quarter. Specifically, the soft-drink giant reported comparable earnings of $0.50 a share, an increase of 2% from the prior-year period and a penny above our estimate. The advance, though modest, was notable for being the first positive earnings comparison in more than two years.

The company's refranchising program continues to have a big influence on operating results. Structural items, such as the ongoing sale of bottling operations across the United States, reduced quarterly revenues by 18% and pretax income by 9%. These efforts are now largely completed in the U.S. and should wrap up here before the end of 2017. Looking into next year, the company aims to finalize its refranchising in Canada, and also undertake a similar strategy in Africa. (As part of this initiative, the company recently took a majority interest in the Coca Cola Beverages Africa, which will now be accounted for as a discontinued operation.)

Meanwhile, organic revenues rose 4% year over year, aided by continued improvement in pricing and mix, which has been a point of emphasis for the company. Coca-Cola added to its market share in nonalcoholic ready-to-drink beverages. (Organic revenues are adjusted for refranchising, currency effects, and other items.) By comparison, total unit case volume was flat, consistent with the trend in the first half of the year. One notable bright spot in this regard was Coca-Cola Zero Sugar, which posted high-single-digit volume growth, helped along, in part, by its introduction in the U.S. market. The roll out of this product, a key element of management's efforts to shift the portfolio toward healthier drinks, should be completed in all major markets by next spring. Moving further down the income statement, pre-tax income (adjusted for currency and structural items) rose 12% from the prior-year period, aided by improved pricing and productivity initiatives.

Looking ahead, we expect recent operating trends to carry over into the December quarter. The company made no changes to its full-year outlook for organic sales (up 3%) or comparable earnings (flat to down 2% from 2016's $1.91 a share). For our part, we are keeping our share-net estimate at $1.90, though we have trimmed a penny from our fourth-quarter call, partly to reflect increased operating costs in the wake of recent hurricane activity. For 2018, we continue to look for profits to climb 3%, to $1.95, as increased currency headwinds and a higher tax rate figure to largely offset the benefit of diminishing structural headwinds.

Overall, Coke's third-quarter results offered few surprises, and the stock was little changed on the news. For the year-to-date period, this equity is up about 10% in price, lagging behind the Dow Jones Industrial Average, as the market seemingly wants to see more progress on the company's transformation efforts before embracing these shares. That said, KO stock still offers a number of attributes that make it suitable for conservative investors, including a top score for Price Stability (100) and a dividend yield that is more than 100 basis points above the Value Line median.

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.