Coca-Cola Results Sparkle

"Coke Is It!" -- while that slogan may be long gone, and only remembered by faithful Coke drinkers, Coca-Cola's rising brand today draws up similar comparisons to the days of old when Coke's name was a dominant feature in the soft-drink landscape.

As I mentioned in my preview, things have changed since the "old days," and Coke management has faced and overcome several challenges that are present in the beverage industry today.

Before the bell on Wednesday, Coke beat the expectations of the Street on both the top and bottom lines, posting earnings per share of 71 cents per share (estimate was 68 cents) with revenue of $7.69 billion. The revenue number signifies a whopping 19% increase from the period prior.

Much of the gain was, as expected, due to growth in emerging markets (thanks to a strong branding effort) and in Asia, with a boost given to revenue by the weak dollar. The good thing for Coke is that these trends will likely continue in the near future, because my dollar outlook calls for further weakness and economic strength abroad.

Also contributing to the strong numbers were energy and soda-alternative drinks such as Powerade and Dasani, sales of which rose by 14%, and this is as the Vitamin Water brand joins the lineup with Coke's recent acquisition of Glaceau.

My take on all of is that I am happy to see it (as I mentioned, my clients and I own shares), because in this day and age, just selling carbonated soft drinks is not going to get it done on the bottom line as the "wellness" movement grows in the U.S. and gets footing elsewhere in the world. I have to applaud Coke's management for continuing to put enough fizz in Coke's image to compel the consumer to look beyond the carbonation.

Tuesday's Preview

Before the bell on Wednesday, Coca-Cola (KO - commentary - Cramer's Take) reports earnings for third quarter. Revenue is expected come in at $7.3 billion, which breaks down to 68 cents per share and represents a 6-cent gain over last year over the same period and is a 13% increase in revenue.

Coca-Cola is releasing these earnings on the back of a strong report from main competitor PepsiCo (PEP - commentary - Cramer's Take) last week. Pepsi shares, however, have fallen over 2% since the report, as little guidance was given on future earnings and concerns were expressed over rising input costs. I expect similar things to surface in the Coke report, however, there are a few significant differences that I think make Coke the better stock to own from here.

After a couple years of lousy stock performance, Coca-Cola has been one of the better performers in the DJIA this year, thanks to what I consider to be an improving product line and productive efforts by the company to improve the brand worldwide. Mix in a falling greenback, and overseas revenue gets that much more attractive. Coke has also effectively maintained its dedication and innovation to the non-soda sector, investigating herbal drinks in China and expanding its energy drink offerings elsewhere.

Coke also enjoys stronger pricing power and effectively wider margins than its main competitor, and this fact is one thing that I think can help offset the rising costs of everything from the ingredients used in making the drink to shipping costs. Also, stir in some cost cutting in the U.S. and Ireland, and I'm confident that management is ready to continue to fuel Coke's turnaround, even if slow sales continue to show up in the U.S., which is likely.

We have been owners of Coca-Cola stock for most of the year as the dollar has continued to decline vs. other currencies and the global economy has strengthened. At my firm, we have played this almost as a defensive move against volatility in the U.S. and uncertainty over interest rates. With economic growth domestically in question, at least into the end of the year, I think that Coke is positioned as well as any of the Dow 30 stocks to hold up amidst further equity weakness in the U.S.

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At the time of publication, Martin was long Coca-Cola, although holdings can change at any time without notice.