Coca-Cola (KO)

Beverage company Coca-Cola (NYSE:KO) met Wall Streets revenue expectations in Q3 CY2025, with sales up 3.9% year on year to $12.41 billion. Its non-GAAP profit of $0.82 per share was 5.3% above analysts’ consensus estimates.

Company Overview

A pioneer and behemoth in carbonated soft drinks, Coca-Cola (NYSE:KO) is a storied beverage company best known for its flagship soda.

These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the rise of cannabis, craft beer, and vaping or the steady decline of soda and cigarettes. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.

Competitors that offer sodas and other beverages include PepsiCo (NASDAQ:PEP), Keurig Dr. Pepper (NASDAQ:KDP), Nestle (SWX:NESN), and Monster Beverage (NASDAQ:MNST).

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $47.79 billion in revenue over the past 12 months, Coca-Cola is one of the most widely recognized consumer staples companies. Its influence over consumers gives it negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don’t have). However, its scale is a double-edged sword because there are only a finite number of major retail partners, placing a ceiling on its growth. For Coca-Cola to boost its sales, it likely needs to adjust its prices, launch new offerings, or lean into foreign markets.

As you can see below, Coca-Cola’s sales grew at a sluggish 4.1% compounded annual growth rate over the last three years, but to its credit, consumers bought more of its products.

This quarter, Coca-Cola grew its revenue by 3.9% year on year, and its $12.41 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.5% over the next 12 months, an acceleration versus the last three years. This projection is above the sector average and suggests its newer products will fuel better top-line performance.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Coca-Cola generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Coca-Cola’s average quarterly volume growth was a healthy 1%. Even with this good performance, we can see that most of the company’s gains have come from price increases by looking at its 9.8% average organic revenue growth. The ability to sell more products while raising prices indicates that Coca-Cola enjoys some degree of inelastic demand.

In Coca-Cola’s Q3 2025, sales volumes jumped 1% year on year. This result was in line with its historical levels.

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

Coca-Cola has best-in-class unit economics for a consumer staples company, enabling it to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an elite 61.1% gross margin over the last two years. That means Coca-Cola only paid its suppliers $38.87 for every $100 in revenue.

This quarter, Coca-Cola’s gross profit margin was 61.4%, in line with the same quarter last year. On a wider time horizon, Coca-Cola’s full-year margin has been trending up over the past 12 months, increasing by 1.2 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Coca-Cola has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer staples business, boasting an average operating margin of 25.7%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Coca-Cola’s operating margin rose by 10 percentage points over the last year, as its sales growth gave it operating leverage.

This quarter, Coca-Cola generated an operating margin profit margin of 32.1%, up 11.1 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

In Q3, Coca-Cola reported adjusted EPS of $0.82, up from $0.77 in the same quarter last year. This print beat analysts’ estimates by 5.3%. Over the next 12 months, Wall Street expects Coca-Cola’s full-year EPS of $2.97 to grow 7.6%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Coca-Cola has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 9.5% over the last two years, quite impressive for a consumer staples business.

Taking a step back, we can see that Coca-Cola’s margin expanded by 4.3 percentage points over the last year. This is encouraging because it gives the company more optionality.

Coca-Cola’s free cash flow clocked in at $4.56 billion in Q3, equivalent to a 36.8% margin. Its cash flow turned positive after being negative in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Coca-Cola’s five-year average ROIC was 15.7%, higher than most consumer staples businesses. This illustrates its management team’s ability to invest in profitable growth opportunities and generate value for shareholders.

Coca-Cola reported $15.78 billion of cash and $47.42 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $15.95 billion of EBITDA over the last 12 months, we view Coca-Cola’s 2.0× net-debt-to-EBITDA ratio as safe. We also see its $712 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Coca-Cola beat analysts’ organic revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $70.72 immediately following the results.

Updated: December 4, 2025 at 9:50 PM EST

Are you wondering whether to buy Coca-Cola or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

There are definitely a lot of things to like about Coca-Cola. Although its revenue growth was a little slower over the last three years, its growth over the next 12 months is expected to be higher. And while Coca-Cola’s projected EPS for the next year is lacking, its admirable gross margins are a wonderful starting point for the overall profitability of the business. On top of that, its impressive operating margins show it has a highly efficient business model.

Coca-Cola’s P/E ratio based on the next 12 months is 22.2x. Looking at the consumer staples landscape right now, Coca-Cola trades at a pretty interesting price. For those confident in the business and its management team, this is a good time to invest.

Wall Street analysts have a consensus one-year price target of $79.13 on the company (compared to the current share price of $70.47), implying they see 12.3% upside in buying Coca-Cola in the short term.