From Morningstar: 2025-05-13 04:38:00

Coca-Cola reported a 6% organic sales growth in the first quarter, with a 5% price mix increase. Adjusted operating margin widened to 33.8%. Despite a weaker macro backdrop, Coke increased sales across all regions by focusing on zero-sugar recipes, flavor innovations, and responsive execution. The firm held its 2025 outlook for organic sales to grow 5%-6% and adjusted earnings per share to grow 2%-3%.

Coke’s localized supply chain should insulate it from trade policy changes. The firm confirmed the tariff impact should be manageable. The company plans to raise its $66 per share fair value estimate for Coca-Cola by a low-single-digit percentage. Shares look fully valued, trading at 24 times 2025 earnings. Coke’s strategy on low-calorie beverages and product innovation is expected to appeal to health-conscious consumers and fuel volume gains in the longer term.

Morningstar believes Coca-Cola stock is overvalued compared to its long-term fair value estimate of $66 per share. In 2024, Coke posted strong results with a 12% increase in organic sales and 7% increase in comparable EPS. The company has a wide economic moat built around its global beverage operations due to strong intangible assets and cost advantages. Coca-Cola has a strong balance sheet with $14.6 billion in cash and short-term investments as of December 2024.

Coca-Cola has a Low Morningstar Uncertainty Rating. Close bottler relationships are crucial to its business model, but in periods of high inflation, these relationships could be pressured. Coke can leverage strong bottler relationships in underpenetrated emerging markets to drive volume growth. However, secular headwinds in carbonated soft drink demand in developed markets pose a challenge to its long-term growth outlook.



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