Coca-Cola Earnings: Beverage Volumes Set to Rebound on Innovation and Targeted Marketing

Key Morningstar Metrics for Coca-Cola

• Fair Value Estimate: $64.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Low

What We Thought of Coca-Cola’s Earnings

Despite headwinds from consumer belt-tightening and geopolitical uncertainties, Coca-Cola KO delivered solid third-quarter results, including 9% growth in organic sales and 5% growth in comparable earnings per share. The resilient performance reaffirmed our constructive view on Coke’s long-term growth outlook, underpinned by its total beverage portfolio strategy and unwavering commitment to product innovation and brand investment.

We plan to maintain our 2024 forecasts for sales of $46 billion and adjusted EPS of $2.86, which align with management’s outlook, and our 10-year forecasts for mid-single-digit annual sales growth and low-30s operating margins. We maintain our fair value estimate of $64 per share, and the stock looks fully valued.

For the quarter, volumes dipped 1% on soft demand in China, Mexico, and Turkey, but Coke still outperformed PepsiCo PEP (with beverage volume down 2%), thanks to solid volume trends and market share gains in the United States and Europe. We attribute Coke’s strength in these markets to consumer-centric innovations and digitally enhanced marketing programs reinforcing the differentiated experiences associated with Coke’s diverse portfolio. In particular, concerted efforts to provide healthier beverages resonated with consumers, driving volumes of Coca-Cola Zero Sugar up 11%. We expect similar initiatives, implemented in collaboration with bottlers in Latin America and Asia, to help restore volume growth in the regions.

The 10% price-mix rise looked high, but once we strip away impacts from hyperinflationary markets, core pricing growth of 6% was consistent with our mid-single-digit expectation, which we view as reasonable to preserve Coke’s value standing. Pricing in the quarter also benefited from a favorable volume mix from developed markets, where Coke product prices are higher than global averages. As emerging market volumes rebound and hyperinflationary pressure eases, we expect Coke’s core pricing to normalize to 4% in 2025.