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Beverage giant and Dow-30 staple The Coca-Cola Company (KO Free Coca-Cola Stock Report) remains on track for an unexciting 2014. The bottler reported lackluster results for the June quarter, as revenues declined 1% year over year, while earnings inched ahead 2%, to $0.64 a share. Foreign currency continued to impede growth, taking 2% off the top line and clipping 4% from operating income. Overall, sales and operating income would have risen 3% and 5%, respectively, excluding foreign currency and structural changes. The stock traded notably lower on the news.


Meanwhile, the company continued to gain value share in the non-alcoholic ready-to-drink market, though progress remains slow. Overall, worldwide volumes rose 3% from the prior-year period, a slight improvement from the first quarter's 2% gain. Notably, trends improved modestly in sparkling beverages, as volumes rose 2%, up from a 1% decline in the March quarter. This includes 1% growth in the Coca-Cola brand, which benefited from sponsorship of the World Cup and implementation of a new marketing campaign in many markets. Incidentally, the company's sponsorship of the World Cup wasn't enough to light a fire under sales in the host country, as overall volumes in Brazil were flat amid aggressive competition and a deteriorating economic environment. The company had better success elsewhere, though, particularly Asia, where volumes rose 8%.


Still beverages, too, remain a bright spot, as volumes rose 5%. Packaged water and sports drinks produced solid growth, though the juice category in North America took a step back following price increases implemented in response to higher commodity costs.


Overall, we expect the company will continue to show limited bottom-line progress in the second half of the year. In all, 2014 earnings will likely reach $2.10 a share, up $0.02 (or 1%) from last year's tally. Coke should be in a better position to pick up the pace in 2015, with share net likely rising 7%, to $2.25. In the absence of further exchange-rate challenges, revenues ought to advance at a mid-single-digit rate, as brand-building efforts help to boost volumes. The beverage company is in the early stages of an initiative to increase investments in brand-building by $1 billion between 2014 and 2016, including $400 million this year.


We don't foresee a catalyst in the near term to reignite enthusiasm for KO shares. Still, conservative investors may still wish to take a closer look here. At its recent levels, this high-quality equity looks to offer solid risk-adjusted total return potential to 2017-2019, while presenting income-oriented investors with a solid dividend yield while they wait.


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.