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Following another quarter of global volume growth, Coca-Cola (KO) quenched precisely what investors were thirsty for in Q2. The beverage behemoth recorded top- and bottom-line upside in the quarter, while bumping its FY24 adjusted EPS and organic revenue growth outlook modestly higher. Perhaps most impressive and a clear testament to exceptional brand power, KO delivered positive +2% volume growth in Q2, once again exceeding PepsiCo's (PEP) global beverage volumes, which were flat. KO has topped PEP's global volume growth for six quarters running.

• Headline numbers were what many have come to expect from KO, delivering a moderate bottom-line beat on mild revenue growth of 3.3% yr/yr to $12.4 bln. When backing out currency fluctuations, i.e., a strong U.S. dollar, which clipped 5 pts off revenue growth, and M&A impacts, organic revs grew by 15.0%.
• Inflationary pricing remained a contributor to KO's organic revenue growth in the quarter. Outside of the Asia Pacific, price/mix jumped significantly, accelerating in some markets, including North America, where the metric was up by 4 pts from last quarter to 11%. Meanwhile, in Latin America and EMEA, the pace at which price/mix grew remained eye-watering, leaping 19% and 24%, respectively.
  • On a side note, KO's price/mix can be somewhat misleading as an uptick in price comprises only around half of the total increase.
• However, KO's brand portfolio superseded the inflationary climate. In Europe, volumes remained flat yr/yr, while in North America, they slipped by 1%. While both figures reflected how consumers are reducing their basket sizes and shopping trip frequency to better combat higher prices, they were impressive given the speed at which costs rose in Q2. Additionally, the 1% drop in North America exceeded PEP's 3% decrease.
  • Meanwhile, in Latin America, where inflation has been more historically common, volumes ticked 5% higher. Finally, in Asia Pacific, volumes expanded by 3%, supported by price compression.
• As volumes held up, adjusted operating margins were able to continue expanding, increasing by 120 bps yr/yr to 32.8%. KO's Global Ventures segment was a highlight here. This unit comprises several businesses, including fees earned from KO's Monster (MNST) partnership, and has minimal overhead. Meanwhile, aside from Asia Pacific, all geographies supported KO's margin growth.
• KO is confident it can continue to leverage its brand power to deliver sound numbers in FY24 despite the challenging macroeconomic backdrop. The company raised its FY24 financial goals, targeting adjusted EPS of $2.82-2.85 from $2.80-2.82 and organic revenue growth of +9-10%, up 1 pt from its prior forecast.

In an environment that has constantly weighed on the end-consumer's purchasing power, KO's Q2 results were once again refreshing, especially following PEP's Q2 report earlier this month. While KO's non-carbonated beverage portfolio, including juices, sports drinks, and brands like Fairlife, has performed decently, it was the company's trademark Coca-Cola brand, including Zero Sugar, that enjoyed the most pronounced volume gains in Q2. This strength makes KO a force to be reckoned with, and it can keep its shares trending higher despite a wobbly global economy.