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In its second-quarter earnings report, The Coca-Cola Company (KO) noted renewed growth in North America, where the company’s sales volume and market share had been declining for some time. As a result we have revised our price estimate for Coca-Cola’s stock from $56.45 to $59.94.

Coca-Cola is the world’s largest manufacturer, marketer and distributor of non-alcoholic beverages. In the beverage market, the company competes primarily with PepsiCo (PEP) and Dr Pepper Snapple Group (DPS).

Below we discuss factors driving Coca-Cola’s North American growth and explain how this growth might impact its share value.

Product Innovation Boosts Sales

In the North American market, Coca-Cola has recently benefited from a number of new product launches. The recently introduced, two-liter contour package and Coca-Cola’s innovative new freestyle fountain machine have also garnered positive reviews. So has Coca-Cola’s new line of immediate consumption offerings. Typically less than 500 ml in quantity, these are available as both single-serve packages and fountain products.

Strikingly, sales of portion control offerings in the supermarket channel have grown by 4% so far in 2010. This line includes several packages below 12 ounces with 100 or fewer calories.

Coca-Cola Could Gain Share in a Growing North American Market

The US carbonated soft drinks market, which comprises most of the North American market, has been declining in recent years. But as Coca-Cola and its competitors roll out innovative new products in various distribution channels, the market declines could decelerate and even turn to growth. You can drag the trend-line in the chart below to see how market growth in North America might impact Coca-Cola’s share value.

We also see potential for Coca-Cola to gain market share in North America. The company’s unit volumes and market share have both declined over the past few years. However, recent quarterly earnings indicate a rejuvenated outlook for the company in the US and North America. The combination of a growing market and slight possible share gains for Coca-Cola’s carbonated soft drinks could yield a 3% upside for Coca-Cola’s stock.

On an even more optimistic note, the impact of Coca-Cola’s recent spurt of product innovation is likely to be felt across all categories, including non-carbonated soft drinks, yielding additional upside for the stock.

Disclosure: No position

Source: North American Sales Growth Creates 3% Upside for Coca-Cola