Coca-Cola: What We Think of the Stock After Earnings

Key Morningstar Metrics for Coca-Cola

• Fair Value Estimate
  : USD 75.00
• 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 6% in the second quarter, driven by 2% growth in price/mix and a 4% increase in concentrate sales. Comparable operating profit grew 9.0%, as margin expanded 90 basis points to 35.6%, and comparable earnings per share grew 11.0% to USD 0.97.

Why it matters: Momentum remained strong in the quarter, which benefited from a successful World Cup activation campaign, favorable weather, an easier year-over-year comparison, and broad-based volume gains across geographies and categories.

• Coca-Cola is building innovation hubs across its footprint, which we think will help it tailor new products to local market tastes. We expect this to support our long-term mid-single-digit organic revenue growth expectations.
• The firm raised 2026 organic revenue growth guidance to 5% (4%-5% previously) and comparable EPS growth guidance to 9%-10% (from 8%-9%), given strong first-half performance, though it expects more pressure in the second half.

The bottom line: We expect to increase our fair value estimate by a mid-to-high-single-digit percentage for wide-moat Coca-Cola. Even after that, we think shares are slightly overvalued, having risen more than 25% year to date, outperforming the 9% rise in the Morningstar US Market Index.

• We think Coke is equipped to navigate intense competitive pressures amid strained consumer spending, warranting an uptick in our sales and operating margin forecasts.
• 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 mid-single digits annually over the next 10 years.

Between the lines: On July 16, Coca-Cola disclosed a ransomware cyberattack on Fairlife (roughly 2% of firmwide revenue), forcing it to halt production. Production has mostly resumed, and the company expects no material impact on product availability.