Coke's broad geographic footprint, especially in developing markets such as India and China, is helping it weather a slowdown in the United States and other pockets of pressure such as the slowdown in sales of coffee for offices in Japan.
But currency translation reduced comparable operating income by 14 percent.
We live in a very volatile environment, Chief Executive Muhtar Kent told reporters on a conference call. Different parts of the world are adapting in different ways to this economic tsunami.
As Coke steps up efforts to cut costs and promote its brands, Kent still aims to meet or exceed the company's long-term target of 3-percent-to-4-percent volume growth and high single-digit earnings-per-share growth this year.
The world's largest soft-drink maker also said it would buy back up to $1 billion worth of its stock this year, a move Chief Financial Officer Gary Fayard admitted is somewhat conservative as Coke navigates through the tough environment.
Shares of Coke were down over 2 percent in afternoon trading.
I'm not so sure that it's Coke so much as maybe the shift toward more cyclical issues like Caterpillar, said Hank Smith, chief investment officer for Haverford Investments, which has owned Coke shares for 30 years and bought shares of Caterpillar Inc
Shares of Caterpillar jumped as much as 13 percent on Tuesday after the machinery maker raised its full-year outlook, though the shares pared much of those gains after it said the third quarter would be tough.
Shares of Coke have risen about 25 percent since the beginning of March, in line with a rebound in the Dow Jones industrial average <.DJI>. Caterpillar has soared nearly 50 percent.
While this has been a broad-based rally, it's been led by the more economically sensitive sectors and issues and I think that is the market behaving as a leading indicator, forecasting a recovery in the economy, said Smith.
VOLUME RISES, REVENUE FALLS
Atlanta-based Coke's net income climbed to $2.04 billion, or 88 cents per share, in the second quarter that ended July 3, from $1.42 billion, or 61 cents per share, a year earlier.
Excluding items, profit fell 9 percent to 92 cents per share, topping analysts' average forecast of 89 cents per share, according to Reuters Estimates.
Coke expects an estimated 12 percent to 14 percent currency hit in the third quarter and a low single-digit hit in the fourth, slightly worse than some analysts had expected.
We've projected what we feel is the right projection and we'll see what happens, Kent told reporters. You can never tell what happens in currency, it defies logic many times.
Operating revenue fell 9 percent to $8.27 billion, missing analysts' average expectation of about $8.57 billion, according to Reuters Estimates. The stronger U.S. dollar reduced the value of international sales.
Volume rose 4 percent after rising just 2 percent in the first quarter. Volume rose 5 percent internationally, driven by gains of 33 percent in India and 14 percent in China, but fell 1 percent in North America.
Efforts such as pricing 16-ounce cold bottles of Coca-Cola for 99 cents have attracted cost-conscious consumers. That initiative, now in place across 90 percent of the United States, has added 1 million transactions each week, Kent said.
The future of Coke's North American business model, through which it sells drink concentrate to a network of independent bottlers that in turn bottle and distribute the drinks, has been called into question after rival PepsiCo Inc
Kent again defended his company's franchise model on Tuesday as the best way to operate.
PepsiCo is set to release its quarterly results and speak with analysts on Wednesday.
Shares of Coke were down 2.2 percent to $49.92 while PepsiCo shares were off 0.8 percent to $55.61.
(Reporting by Jessica Wohl; Editing by Brian Moss, Derek Caney and Tim Dobbyn)