Beverage giant Coca-Cola (NYSE:KO) drank in a sales and profit increase in the first quarter that wasn't enough to satisfy the stock market. Despite the increases, Coke narrowly missed analyst estimates and the stock declined.

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High Expectations
Investors have been used to Coke growing results, as the stock has outperformed other consumer product companies in the last year. So when revenues and income came in just a bit light of expectations, the market greeted the stock by dropping it 2% by midday after the report.

Revenue climbed to $10.5 billion from $7.5 billion in the year ago quarter, though a large part of this increase came from the acquisition of Coca Cola Enterprise's North American operations. Global sales increased 6%. Coke registered sales gains in all its major markets, including gains in North America which had previously seen slowing growth.

It also saw its Diet coke brand total a 9.9% market share, which passed PepsiCo.'s (NYSE:PEP) diet offering that has 9.5% of the market. Net income rose from $1.6 billion to $1.9 billion, or 86 cents a share excluding charges, compared to 69 cents in last year's first quarter.

Commodity Cost Alert
Investors were closely watching commodity input costs, as they have been for food companies such as Kraft Foods (NYSE:KFT) and Starbucks (Nasdaq:SBUX). Costs surged from $2.54 billion or 33.7% of total revenue in the year ago quarter to 3.95 billion or 37.5% of revenue in the recent quarter.

Input costs increased for polyethylene terephthalate, or PET, the plastic used for soda bottles. This was a major contributor to the overall cost increases, accounting for $250 to $350 million. Investors are also looking for price increases to counter the ingredient cost pressures on profits. Beverage competitor Dr. Pepper Snapple Group (NYSE:DPS) announced it would raise prices and add cost savings measures, so the input-pricing issue will continue to be closely watched in the sector.

The Future Of Coke
Despite the jump in North American sales, the greatest growth for Coke is expected to continue to be around the world. While Japan had difficulties due to the effects of the tragic earthquake in March, global growth was strong elsewhere. Eurasia and Africa, which grew sales by 8%, and Latin America at 7% growth, should be fertile areas for Coke in the future.

Coke, along with its competitors Pepsi, Dr. Pepper, and Hansen Natural (Nasdaq:HANS), should continue to mine a relatively simple business model of providing a variety of beverages for which demand only seems to grow. Coke's earnings yield is 5.4%, and its return on assets (ROA) is 9.3%, while Pepsi has a 7.5% earnings yield and an 11% ROA. (To learn more, see Use ROA To Gauge A Company's Profits.) Although some of the metrics of the industry don't fit the high-growth requirements of a double-digit earnings yield and an ROA of 20% or more, Coke and the other soft-drink providers are still a solid investment.

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