Skip to Content

Coke: Not All Bad News

Coke’s third-quarter was marked by positive pricing trends, encouraging volume expansion and solid profitability, but its shares are fairly valued, writes Morningstar’s Adam Fleck.


We're holding our $43 fair value estimate for wide-moat  Coca-Cola (KO) following third-quarter results. Positive pricing remains a critical theme, with price and mix contributing about 3 percentage points of top-line growth in the quarter (and 2 points year to date), driven by a continued rational competitive environment in North America and substantial price hikes in Latin America to mitigate negative currency impacts. We forecast 3 points of full-year price/mix contribution, continuing into the immediate to longer term as Coke increases its mix of smaller package sizes (which offer high per-ounce pricing) and enjoys a continued oligopolistic U.S. market.

We're also encouraged by Coke's volume performance in the quarter; unit case sales (a measure of end-market demand) ticked up 3% from a year ago, with noncarbonated beverages climbing a solid 6%. Carbonated soft drink volume also increased about 2%, though this was split between continued poor performance in diet drinks (Diet Coke fell 8% year over year) and positive performance in Coca-Cola (up 1%) and Coke Zero (up 8%). The company's own concentrate volume was flat in the quarter owing to intrayear timing; concentrate sales had led unit case sales earlier in the year. This led to a currency-neutral revenue organic revenue growth rate of about 3%. Year to date, concentrate sales are up about 3% but face a particularly difficult year-over-year comparison in the final quarter, leading us to maintain our full-year 1% volume growth outlook.

Adam Fleck does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.