Morningstar

Coca-Cola Earnings: Strong Performance Continues Despite Challenging Consumer Environment

We expect to raise our fair value estimate of Coca-Cola stock.

The Coca-Cola Co logo and signage outside its headquarters.
Aaron M. Sprecher via AP
Securities in This Article
Coca-Cola Co
(KO)

Key Morningstar Metrics for Coca-Cola

  • Fair Value Estimate
    : $80.00
  • Morningstar Rating
    : ★★
  • Morningstar Economic Moat Rating
    : Wide
  • Morningstar Uncertainty Rating
    : Low

What We Thought of Coca-Cola’s Earnings

Coca-Cola’s KO organic revenue rose 7% in the third quarter, driven by 1% growth in price/mix and a 7% increase in concentrate sales (difference due to rounding). Comparable operating margin expanded 100 basis points to 32.9%, and comparable earnings per share grew 11.0% to $0.91.

Why it matters: Momentum remained strong, as affordability, zero sugar, and local execution drove robust concentrate sales. Prices rose 4%, with a 3% headwind from geographic and category mix. We view the combination of pricing and concentrate growth as exemplifying Coke’s brand strength.

  • Operating margin expansion trailed gross margin expansion of 170 basis points as the company stepped up marketing. We forecast 11% of sales spent on marketing over the next five years (20 basis points higher than the last five years), which we view as prudent to support sales growth.
  • The firm raised 2026 organic revenue growth guidance to at least 5% (from approximately 5%) and comparable EPS growth guidance to 11% (from 9%-10%). Management cautioned that the strained consumer environment will continue into 2027, with value a key consideration.

The bottom line: We expect to increase our $80 fair value estimate by a mid-single-digit percentage for wide-moat Coca-Cola on higher near-term operating margin. The increase should drive our full-year EPS growth forecast closer to the 11% guidance from 9% before the print.

  • Shares were down roughly 1% intraday, roughly in line with peers, as we think there were few surprises in the earnings release. The stock has risen more than 30% year-to-date, leaving Coca-Cola in slightly overvalued territory, as we think the market prices in flawless performance.
  • We see more attractive upside in wide-moat PepsiCo’s shares, as we think the market underappreciates its dominant snack business. As it continues to focus on innovation and affordability, we forecast the top line to grow by mid-single digits annually over the next 10 years.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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