coca cola that The first quarter 2025 revenue report was reported on April 29th. Here is Morningstar’s view on Coca-Cola revenue and equity:
What we thought about Coca-Cola income
Coca-Cola increased its organic sales growth of 6% in the first quarter with a 5% price mix. The adjusted operating margin increased from 140 basis points to 33.8%.
Why it matters: Despite the weak macro background, Cola has increased sales across all regions. This is due to its focus on zero sugar recipes, innovation in flavor and packaging, and the implementation of the responsive-in-market.
•Cola launched more affordable fares in attractive price ranges and refillable bottles, expanding its distribution through value channels. This has resulted in a 2% increase in unit cases, led by moderate digit increases in emerging Asia, the Middle East and Africa.
•Consistent with our view that its localized supply chain should isolate it from changes in trade policy, Coke confirmed that the impact of tariffs is manageable. The company increased its 2025 outlook for organic sales by 5%-6%, and increased by 2%-3%, adjusting earnings per share.
Bottom line: We plan to raise our fair value estimate of $66 per share at a low digit percentage of the time zone with a wide digit percentage. The stock is fully valuable and is trading at 24 times the revenues in 2025.
•2025 forecast for sale incorporates a 330 basis points currency headwind and a more moderate price rise (4%) compared to low 10-year-old hikes over the past three years as coke improved its affordable price focus.
• Amidst the geopolitical and macro uncertainty, we believe Cola is wise to enhance brand messaging with customized content to connect with consumers. Coke predicts that in 2025, 11% of its sales will be directed towards marketing, up from an average of 10% over five years.
Appearance: We hope that coke will appeal to health-conscious consumers and increased fuel volumes in the long term, with its low-calorie and nutritional benefits.
•At 30% of the total volume, low or calorie drinks are expected to grow based on recipe innovation and bottler enthusiasm.
•Its premium dairy products, prebiotic sodas, and vitamin-infused tea should also gain traction with consumers.
Coca-Cola stock price
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Coca-Cola fair value estimate
The two-star rating believes Coca-Cola shares are overvalued compared to a long-term fair value estimate of $66 per share, an increase from $64 per share. In 2024, Cola recorded strong results, including a 12% and 7% increase in EPS, comparable to organic sales, respectively. In particular, despite consumer pullbacks and geopolitical uncertainty, the global unit case volume increased by 1% per year. In 2025, we modeled sales to grow 2% (incorporating a 3% foreign currency headwind) to $48 billion, and adjusted the EPS to expand 3% to $2.96.
In terms of profitability, model the operational margin to increase 110 basis points to 31.2% at the end of the 10-year forecast period compared to 2024.
Read more about Coca-Cola’s fair value estimates.
Economy Moat Rating
Coca-Cola believes it has built a broad economic moat for global beverage operations based on its strong intangible assets and a significant cost advantage that will allow it to provide excess investment returns above the cost of capital for more than 20 years. We modeled the company to generate an average 37% investment capital or ROIC returns over a period of 10 years of explicit forecasts.
As the world’s most renowned beverage company, Coca-Cola owns a strong portfolio of renowned and iconic brands that resonate with consumers around the world, choosing products for both home and home consumption. The special connections that Coca-Cola nurtures and maintains with generations of consumers have allowed businesses to dominate the carbonated soft drink (CSD) category at the core of its business (69% of Coca-Cola’s 2024 unit case volume is on sale).
Read more about Coca-Cola’s Economic Moat.
Financial strength
Coca-Cola believes it has a strong balance sheet and sufficient liquidity to withstand macroeconomic volatility and invest in long-term growth. With $14.6 billion in cash and short-term investments in the balance sheet as of December 2024, a $4.2 billion backup credit line for general purpose use, and a commercial paper program established in the US, the company has given companies consistent access to short-term financing at a low price. Leverage is manageable, with net debt/adjusted EBITDA doubled in 2024, within a long-term target of 2-2.5 times. We expect the metric to remain at a low level over the next few years.
Read more about Coca-Cola’s financial strength.
Risk and uncertainty
Assign a low morning star uncertainty rating to Coca-Cola. We believe that bottler relationships are important to their business model and return profile, but during periods of high inflation, these relationships can put pressure on us as bottlers tend to bear the brunt of increased costs. This isn’t too bad in the US, where local bottlers are small and limited in negotiation power, but emerging markets where healthy quantities of growth are key, are likely to negotiate, such as Arca Continental and Cola femsa.
Read more about Coca-Cola’s risks and uncertainties.
I say the Bulls
•Coke can leverage the powerful bottler relationships of uninvasive emerging markets to promote volume growth with classic recipes and new products tailored to local flavours.
• Heavy investments in digitalized supply chains and data analytics have made cola and its bottlers better coordinated in product planning, manufacturing and market strategy.
• As Costa recovers from pandemic-related disruptions, it should help Coca-Cola gain a stiffer foothold in the coffee category and provide more consumer insights given its global footprint.
I say the bear
• Secular headwinds in the demand for carbonated soft drinks in developed markets are a challenge for Coca-Cola’s long-term growth outlook.
•The company’s brand portfolio and product lineup in the non-sparkling category are less robust and requires significant investments to strengthen its competitive position.
•In two-thirds of revenue from international markets, coke is facing certain currency fluctuations that drive the volatility of reported revenue.
This article was edited by Gautami Thombare.
