It’s been anything but a stable year for Coca-Cola (NYSE:KO) shareholders. Year-to-date, Coca-Cola shares are at parity with their January opener, but that doesn’t tell the whole story. The iconic soft-drink maker got off to a flying start before collapsing into a series of choppy trades. Will the upcoming KO stock earnings report for the second quarter straighten the ship?

Ahead of the financial disclosure, the signs didn’t appear favorable. KO hasn’t inspired confidence over the last several months, with a majority of covering analysts recommending a “hold” position. This month, only 11 analysts out of 25 total have a “buy” rating or better. The rest are holds except for a lone analyst with an “underperform” rating.

This fence-sitting sentiment reflects the markets’ almost-complete indifference towards Coca-Cola stock. Over the trailing five-year period, shares have gained a little over 11%. That is the very definition of pedestrian, and it helps to explain why the buildup to the KO stock earnings report was overshadowed against other disclosures.

Plus, the company is undergoing a thorough transition in a tough and politically-volatile environment. Coca-Cola is currently in the middle of winding down its bottling business. Management has had its eyes on exiting the business due to its low margins. In its place, the beverage-maker will focus on revitalizing its key brands and assets.

In Q1 of this year, Coca-Cola’s re-franchising of its bottling operations caused a huge revenue hit. It delivered $7.63 billion, down more than 16% from the $9.12 billion in the year-ago quarter. However, the notable upside was profitability. The “big three” of the margin metrics — gross, operating, and net — substantially improved from Q1 2017 results.

But will an improved pathway toward future profitability be enough for this latest KO stock earnings report?

All-around Solid Results for KO stock Earnings in Q2

Coca-Cola surprised naysayers earlier this morning with a solid beat on both profitability and revenues. Against a consensus target for the KO stock earnings per share at 60 cents (adjusted for continuing operations and other items), the actuals came in a penny higher.

The beverage-maker delivered net income of $2.32 billion, which was up substantially from $1.37 billion from the year-ago quarter.

For revenues, consensus called for $8.54 billion. The actual haul exceeded expectations by 4.2% to $8.9 billion. On paper, this result is down sharply from the $9.7 billion sales bonanza witnessed in Q2 2017. However, the Street anticipated this downgrade due to the aforementioned re-franchising of Coca-Cola’s bottling operations. Moreover, the 8.2% miss is narrower than the anticipated 12.1% miss, and it’s more narrow than the 16% miss from Q1.

According to a CNBC broadcast, management is holding the line on guidance for the year. Essentially, the company expects robust growth from here on out despite the difficult competitive environment. Coca-Cola CEO James Quincey acknowledged currency-exchange headwinds which have negatively affected its competitors. That said, Quincey believes his organization’s much-improved operations will offset currency impact.

Brand highlights from the KO stock earnings report include huge growth for Diet Coke, which had languished for several years. More importantly, the lift in Diet Coke didn’t cannibalize sales for Coke Zero. Also adding to the positive sentiment is improved soda or “sparkling” sales in the U.S. market.

One risk factor to note is the ongoing China-tariff standoff. Quincey acknowledged that they’re impacted by steel and aluminum tariffs. In response, they’ve adapted with countermeasures such as smaller packaging.

Coca-Cola on a Believable Recovery track

So how should investors respond to Coca-Cola following the KO stock earnings report? As InvestorPlace writer Tom Taulli admitted, shares have represented dead money over the past year or so. Additionally, competitor performance doesn’t really generate confidence towards the broader sector. For instance, Coca-Cola rival PepsiCo (NASDAQ:PEP) is down 3% for the year.

The main challenge is shifting consumer tastes, especially among the younger demographic. Indeed, Coca-Cola and Pepsi have both unintentionally catered to a surprisingly old demographic. According to a 2016 Adweek report, Coke was most popular among people aged 35 to 44 years. The largest consumer base for Pepsi featured the plus-65 crowd.

But Taulli argues that you can still find value in KO stock, and I agree with him. For starters, let’s talk about the fact that the Coca-Cola brand is one of the world’s most recognized. While Americans may be jaded, the company maintains a formidable international presence. Moreover, they’ve successfully rebranded their Diet Coke soft drinks to match current youth trends.

Second, the company is addressing Millennials’ thirst for healthier beverage alternatives. That’s always been an issue in prior KO stock earnings report. Taulli writes:

But the good news is that KO has been proactive in finding ways to deal with the problems, such as with reducing sugar content and decreasing the packet sizes. There has also been a diversification away from carbonated drinks. To this end, the company has focused on brands like Gold Peak, Honest Tea, Ayataka and FUZE TEA. All of these have seen strong growth rates.

Make no mistake: KO is a risk. However, with a refocused business and a nice dividend yield, it has potential.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.