Coca-Cola earnings down, but developing markets a bright spot

Evaluating global performance, the company cited challenging conditions in Spain and Eastern Europe, as well as Russia. The macro environment has made the company focus on cost containment, and the $500 million in annual savings being targeted looks to be ahead of schedule with the majority being realized by the end of this year. In developed markets where growth in Coke's traditional soft drinks are stagnating, other products (which include Dasani water, Nestea, and Minute Maid juices) are still helping the company to grow sales.

As for investment prospects, Coca-Cola is a classic blue chip: a peerless brand with stable cash flows that pays a reasonably large dividend of close to 4%. In the last year, the company earned a 25% cash return on average equity -- profitability any typical business would envy. At 15x forward earnings, the stock is also far below its traditional trading range based on valuation ratios.

The stock might not shoot the lights out, but there are few (if any) companies with Coke's competitive advantages. It's an overlooked truism, but companies make money on customers -- and if international growth is any indicator, Coke's customer base seems to grow quarter after quarter regardless of the geography they target. There are still plenty of people ready and willing to consume more Coke products, and over time that should steadily push earnings (and the stock price) higher.

For more: Coca-Cola 2009 Second Quarter and Year-to-Date Results

James Cullen also edits and writes at CollegeAnalysts.com. He has no personal position in the stocks mentioned above.