Coke Upgraded, Growth Expected

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Shares of Coca-Cola Co. (KO) rose more than 2 percent Friday after a Wall Street brokerage said it had upgraded the soft drink giant because its business had improved and was poised for further growth.

Coca-Cola stock was up 97 cents to $44.50 in early morning trading on the New York Stock Exchange (search). Shares of the company's main rival, PepsiCo Inc. (PEP), were up 44 cents to $55.02 on the NYSE.

Coca-Cola's rally helped boost the Dow Jones industrial average, which gained 52.78 points to 10,607.71.

Investors flashed the buy sign on Coca-Cola, the world's No. 1 soft drink maker, after UBS raised its rating on the company's stock to "buy" from "neutral" and its 12-month target price for Coke to $53 from $46.

The brokerage said Coke's ongoing effort to restructure its operations was working and would boost sales of its beverages.

"We believe the 'turnaround' at Coke is happening now," it said in a research note. "We expect the upside to be driven by the compounding effect of heavy marketing and better execution."

The rosier outlook for Coca-Cola came amid an aggressive campaign by the company to sharpen its innovation and better compete with PepsiCo and other rivals in key markets, particularly the United States.

Atlanta-based Coca-Cola has rolled out a flurry of new products as part of this effort, which began last year when Neville Isdell took over as Coke's chairman and chief executive.

New offerings in the U.S. market include a version of Diet Coke sweetened with the popular sugar substitute Splenda, a diet cola called Coke Zero and flavored versions of Coke's popular Dasani bottled water brand.

The innovation strategy, however, carries risks. If poorly executed, the new drinks could cut into sales of existing products or simply fail to find a niche among increasingly picky consumers.