A Top Warren Buffett Stock to Keep an Eye On

Berkshire Hathaway Chair Warren Buffett has called Coca-Cola one of his company’s “forever” stocks. It’s easy to understand why. The world’s best-known beverage company has built a wide economic moat around its business with its storied brands, loyal following, and significant cost advantages. It dominates the carbonated soft drink market; as a result, it generates predictable cash flows. And the management team has done an exceptional job of maintaining a healthy balance sheet that can withstand economic uncertainties and making astute investments to benefit top-line growth. Morningstar thinks Coca-Cola is a fine company, too; in fact, it earns a spot on Morningstar’s Best Companies to Own list. The stock has frequently traded above our fair value estimate during the past several years but is currently about fairly valued. Today, Coke is a Buffett stock to put on your watchlist to buy on weakness.

We like Coca-Cola’s strategic focus on a total beverage portfolio and view its pivot to nonsparkling categories as boding well for healthy top-line growth. In addition to nurturing brands in-house, the company has bulked up its presence in categories like coffee and sports drinks with strategic acquisitions of strong challengers to entrenched category leaders. We expect this two-prong strategy to serve Coke well. Geographical diversification offers another avenue of growth. Per capita beverage consumption in emerging markets has a long way to go to catch up to North America levels. We expect Coke to blend global best practices in brand and research investment with local culture and taste preferences to accelerate growth in these developing regions.

Key Morningstar Metrics for Coke

• Fair Value Estimate: $69
• Star Rating: 3 Stars
• Economic Moat Rating: Wide
• Uncertainty Rating: Low

Economic Moat Rating

We believe Coca-Cola has a wide economic moat based on strong intangible assets and a significant cost advantage, which will enable it to deliver excess investment returns above its cost of capital over and beyond the next 20 years. We expect the company to average returns on invested capital in the high 30s over our 10-year explicit forecast, comfortably surpassing our 7% estimate for its weighted average cost of capital. Coke’s storied and iconic brands resonate with consumers around the world, making its products the beverage of choice. This brand appeal results in a steady price premium over lesser-known brands as well as low demand elasticity, thus affording Coca-Cola considerable pricing power. With a sales base of $47 billion in 2024 and an expansive global manufacturing and distribution footprint, Coke can wring out scale efficiencies across the supply chain.

Read more about Coke’s moat rating.

Fair Value Estimate for Coke Stock

Our $69 fair value estimate implies a multiple of 23 times our adjusted 2025 earnings estimate and 2025 enterprise value/adjusted EBITDA of 19 times. For 2025, we expect sales growth of 2% and adjusted earnings per share of $2.96, a 2.6% increase. Our projected mid-single-digit sales compound annual growth rate over the next 10 years is driven by strong emerging-market growth, expansion in nonsparkling categories, and the Costa business steadily adding on offerings. We model operating margin to widen to 31.2% at the end of our 10-year forecast period, up 110 basis points from 2024. While we expect limited gross margin expansion after notable gains in recent years from better efficiencies and a favorable mix shift driven by refranchising, we forecast better leverage in selling and distribution expenses.

Read more about Coke’s fair value estimate.

Risk and Uncertainty

In periods of high inflation, Coke’s relationships with its bottlers could be pressured, as the latter tend to bear the brunt of cost increases. Coke has high exposure to international markets, which leads to stepped-up volatility in its operations compared with domestically focused peers. As consumers become increasingly health-conscious, Coke faces the challenge of reducing the health impact of its beverages without compromising the distinct taste that sits at the core of brand loyalty. With the ubiquity of smartphones and social media, food and beverage brands are constantly under consumer scrutiny.

Read more about Coke’s risk and uncertainty.

Coke Bulls Say

• Coke can leverage strong bottler relationships in underpenetrated emerging markets to drive volume growth with classic recipes as well as new products tailored to local tastes.
• Heavy investments in a digitalized supply chain and data analytics have better aligned Coke and its bottlers in product planning, manufacturing, and market strategy.
• Costa should help Coca-Cola gain a firmer footing in the coffee category and provide more consumer insights, given its global footprint.

Coke Bears Say

• Secular headwinds for carbonated soft drink demand in developed markets are a challenge to Coca-Cola’s long-term growth outlook.
• The company’s brand portfolio and product lineup in nonsparkling categories are less robust; heavy investments are needed to bolster its competitive position.
• With two-thirds of revenue from international markets, Coke faces constant currency fluctuations that drive volatility in reported earnings.

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of July 30, 2025.