The 14-month decline in the U.S. dollar against major currencies is scary for Americans. The U.S. has always been proud of a strong currency, and a depreciating dollar makes everything we import more expensive. While it makes our exports more attractive, goods produced here and sold abroad account for a small part of the economy.
For Coca-Cola (KO-N54.790.140.26%), however, the falling dollar helps juice earnings. In the footnotes of its second-quarter regulatory filings, Atlanta-based Coke says it made an extra $1.1-billion (U.S.) abroad due to currency translations. To put that in perspective, Coke posted net income of $2.05 billion during the quarter. (The currency gain is theoretical, in that the company hasn't realized it on its income statement.)
The foreign-currency variable highlights a factor in Coke's business model that should serve the company well. International diversification has made the company resilient in the face of a weak American economy.
Besides currency-translation adjustments, Coke's investments in bottlers around the world have performed well. Excluding Coca-Cola Enterprises, bottling investments for the company have been assigned a fair value of more than $3-billion above the carrying value, the worth of an asset according to its balance-sheet account balance. The network has diversified Coke's revenue streams, making North America just another competitive front.
North America accounts for more than a quarter of revenue, only surpassed by bottling income, but it makes up only 19% of operating income, less than the European Union, Pacific region and Latin America do. Pepsi, Coke's archrival, derives more than half of revenue and operating income from the U.S. Billionaire investor Warren Buffett favors Coke over Pepsi, incidentally. He owns 8.6% of the company, the most of any investor and about the same as the combined holdings of Vanguard, Fidelity and State Street(STT Quote). FULL STORY
