Coca-Cola earnings: Billion-dollar brands and consumer engagement remain growth priorities
Despite macro and geopolitical challenges, Coca-Cola managed to increase sales in line with its long-term target.
Mentioned: Coca-Cola Co (KO)
Key Morningstar metrics for Coca-Cola
- Fair Value Estimate: $74.00
- 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 5% in 2025, driven by 4% growth in price/mix and a 1% volume increase. Adjusted operating profit grew 6.6%, as margin expanded 120 basis points to 31.2% and adjusted earnings per share grew 4.2% to $3.00.
Why it matters: Despite macro and geopolitical challenges, Coca-Cola managed to increase sales in line with its mid-single-digit long-term target, thanks to steadfast brand investments and its total beverage strategy. We expect zero-sugar soda offerings and functional drinks to be priorities in the coming years.
- Innovation focus, consumer insights, and commercial execution continue to underpin a favorable outlook. We expect the bulk of growth to come from the company’s 32 billion-dollar brands (75% non-soda), including the latest additions of Innocent in the United Kingdom and Santa Clara in Mexico.
- Incoming CEO Henrique Braun prudently emphasized the value focus via price pack architecture and lower entry price points. These efforts should help reinforce consumer relationships for the longer term, but we expect 2026 volume to be soft, given sluggish demand in India, China, and Mexico.
The bottom line: We don’t plan any material change to our $74 fair value estimate for Coca-Cola, other than a time value adjustment. We view the shares as fully valued after an 11% run year to date versus the 2% rise in the Morningstar US Market Index.
- We hold our 6% growth forecast for 2026 sales (which aligns with management’s outlook) but will trim our $3.32 adjusted EPS estimate by a low-single-digit percentage on higher marketing costs. Our 10-year estimates for 5% average sales growth and 31% average operating margin are intact.
- While net leverage is low at 1.6 times and we model $13 billion in free cash generation for 2026, major acquisitions look unlikely in the near term. We expect the focus to be on turning around the Costa chain after Coke failed to sell the assets at a rumored valuation of half of the acquisition cost.
