Coke's Diet Soda Sales Impress

Sonia Vora: Coca Cola's first-quarter results tracked in line with our expectation for the year, with our organic sales up 5%, including a 1% contribution from price and mix. We plan to maintain our longer term forecast, which calls for mid-single-digit sales growth, and average gross margin above 65% over our forecast period.

Concentrate volumes were especially strong in the Europe, Middle East, and Africa and Asia Pacific segments, with volumes up 9% and 5% respectively. Trademarked Coca-Cola was the largest contributor to unit case volume growth, which was up 4% during the quarter.

We were particularly impressed by strong performance in the diet soda category, with Coca Cola Zero Sugar growing volume at a double-digit clip. However, new product innovation and distribution growth also helped the firm's top line. During the quarter, the retail value of Topo Chico, a sparkling mineral water brand, grew retail value by over 30%, and Fuze tea was launched in 37 countries in Europe.

Shares are trading at a low double-digit discount to our valuation and have more than a 3% dividend yield, which we view as an attractive entry point for this wide-moat name.