After Earnings, Is Coca-Cola Stock a Buy, a Sell, or Fairly Valued?

Coca-Cola released its second-quarter earnings report on July 28. Here’s Morningstar’s take on Coca-Cola’s earnings and stock.

Key Morningstar Metrics for Coca-Cola

• Fair Value Estimate
  : $75.00
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Low

What We Thought of Coca-Cola’s Q2 Earnings

Coca-Cola’s 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%, as margin expanded 90 basis points to 35.6%, and comparable earnings per share grew 11% to $0.97.

Why it matters: Momentum remained strong in the second 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 more effectively enable it to 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.

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.

The bottom line: We expect to increase our $74 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 to warrant 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.

The following are excerpts from Morningstar’s company report on Coca-Cola.

Fair Value Estimate for Coca-Cola

With its 2-star rating, we believe Coca-Cola stock is moderately overvalued compared with our long-term fair value estimate of $75, implying a 23 times multiple against our adjusted 2026 earnings estimate. Our mid-single-digit sales CAGR projection over the next 10 years is driven by strong emerging market growth (we forecast Latin America and the Asia-Pacific combined to make up 35% of overall sales by 2035, up from 24% in 2025) and expansion in nonsparkling categories (sports and energy drinks) in product assortment and distribution channels.

We forecast top-line growth to be slightly more balanced between price/mix and volume in 2026 and onward. We see growth settling into the 4%-6% long-term target range set by management, which we believe is appropriate, given industry dynamics. Coke has historically augmented organic growth with strategic acquisitions, and we expect it to continue doing so in the coming years.

Read more about Coca-Cola’s fair value estimate.

Economic Moat Rating

We believe Coca-Cola has built a wide economic moat around its global beverage operations based on strong intangible assets and a significant cost advantage. We have modeled the company to generate returns on invested capital, including goodwill, that average nearly 50% over our 10-year explicit forecast, comfortably surpassing our weighted average cost of capital estimate of 7%.

Coca-Cola’s brand appeal results in a steady price premium over lesser-known brands and low demand elasticity, thus affording considerable pricing power. In addition, the scale and experience of a well-connected global Coke system should enable it to accelerate the commercialization of new products and roll out and scale product innovation at a faster pace and at lower cost than rivals.

Read more about Coca-Cola’s economic moat.

Financial Strength

We believe Coca-Cola has a strong balance sheet and ample liquidity to weather macroeconomic volatilities and invest for long-term growth. The company had $16 billion in cash and short-term investments on its balance sheet as of December 2025, close to $5 billion in unused backup lines of credit for general-purpose use, and a well-established commercial paper program in the US, enabling it to consistently access short-term funding at low rates. Incorporating margin expansion over the next five years (driven by marketing and distribution efficiency gains) and steady capital expenditure as a percentage of sales (4%) into our financial model, we expect free cash flows to the firm to remain strong, averaging 28% of sales for the period.

Read more about Coca-Cola’s financial strength.

Risk and Uncertainty

We assign a Low Uncertainty Rating to Coca-Cola. We see long-term bottler alliances as crucial to the company’s business model and return profile, but during periods of high inflation, these relationships could be strained, as bottlers tend to bear the brunt of cost increases.

Coke has high exposure to international markets (over two-thirds of both revenue and profits), which leads to greater operational volatility than domestically focused peers. As consumers become increasingly health-conscious, Coke faces the challenge of reducing the health impact of its beverages without compromising on the distinct taste that sits at the core of brand loyalty. We don’t see environmental, social, or governance risks materially affecting Coke’s operations or investment returns.

Read more about Coca-Cola’s risk and uncertainty.

KO Bulls Say

• Coke can leverage strong bottler relationships in underpenetrated emerging markets to drive volume growth with classic recipes as well as new products tailored to local tastes.
• Heavy investments in a digitalized supply chain and data analytics have better aligned Coke and its bottlers in product planning, manufacturing, and go-to-market strategy.
• Strategic acquisitions in attractive beverage categories including premium dairy align with consumer preferences and should further buoy sales expansion.

KO Bears Say

• Secular headwinds in carbonated soft drink demand in developed markets are a challenge to Coca-Cola’s long-term growth outlook.
• The company’s brand portfolio and product lineup in nonsparkling categories are less robust, and heavy investments are needed to bolster its competitive position.
• With 60% of revenue from international markets, Coke faces constant currency fluctuations that drive volatility in reported earnings.

This article was compiled by Irza Waraich.