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Coca-Cola (KO -1%) is trading modestly lower today after reporting its Q2 results this morning. Investors had high expectations going into the beverage giant's report, as main peer PepsiCo (PEP) reported impressive Q2 results last week. Although KO exceeded EPS expectations, revenue was roughly in line at $12.53 bln. Additionally, a slowdown in organic revenue growth and lackluster volume trends are likely prompting the slight pullback.

• KO continued to rely on pricing strength to help combat pressure from inflation and currency headwinds. Price/mix showed a modest improvement sequentially, which helped revenue return to yr/yr growth after a slight decline last quarter.
• Unit case volume declined 1% yr/yr following 2% growth in Q1. Growth in Central Asia, Argentina, and China was more than offset by declines in Mexico, India and Thailand, with management noting harsh weather events in June as a key factor. North America volume declined 1%, and although that is an improvement from Q1, it reflects continued uncertainty and subdued demand from customers.
• Despite a slight increase in price/mix, KO did see a volume decline that likely offset it. This resulted in a slowdown in organic revenue growth, which slipped to 5% from 6% in Q1. This is generally in line with what we saw with PEP's beverages segment.
• KO still has several bright spots in its beverage portfolio, including Coca-Cola Zero Sugar, Diet Coke, Bodyarmor, and Powerade. In particular, Coca-Cola Zero Sugar volume grew 14% driven by strength across all segments.
• Non-GAAP operating margin was a bright spot with a yr/yr increase of 190-bps to 34.7%, driven by underlying expansion partially offset by currency headwinds. Furthermore, a 63% increase in operating income suggests that KO is doing a good job at managing its costs.

Investors came into this report with high expectations following PEP's strong Q2 results last week. While KO exceeded EPS expectations and had several bright spots in its beverage portfolio, the results were overall not quite as strong as PEP's. An advantage that PEP has is that it has a growing snack business. As such, the comparison is not 100% apples-to-apples. Overall, it looks like investors were expecting perhaps a bit more bullish report from KO.