Coca-Cola Earnings: Strong Results and Well-Positioned to Continue Driving Sales and Profit Growth

Coca-Cola Stock at a Glance

• Fair Value Estimate: $58.00
• Star Rating: 2 stars
• Uncertainty Rating: Low
• Economic Moat Rating: Wide

Coca-Cola Earnings Update

Wide-moat Coca-Cola KO posted better-than-expected organic revenue growth (12%, versus our 11% forecast) and adjusted EPS ($0.68, versus $0.67) in the first quarter of 2023, reaffirming our view that the firm is well-positioned to continue driving sales and profit expansion through consumer-centric innovations and brand marketing.

We are maintaining our $58 fair value estimate on Coca-Cola stock after incorporating the latest results in our valuation model, with our projections for mid-single-digit average annual top-line growth over the next 10 years and average operating margins in the low 30s remaining unchanged.

We attribute the strong (12%) revenue growth to a balanced mix of affordability and premiumization initiatives that enabled the beverage maker to capture revenue opportunities across income levels and consumption occasions even as consumers tighten their purse strings.

Critically, strength was broad-based, with attractive entry price points and value bundles targeting at-home consumption helping Coke deliver double-digit volume growth in large Southeast Asian markets such as Indonesia and Vietnam; while packaging differentiation such as slim cans and returnable glass bottles—coupled with new products like alcoholic ready-to-drink offerings under the Coke and Simply brands—allowed Coke to appeal to developed market consumers at a more favorable price and channel mix. In addition, we are impressed by the continued strength of reformulated classics that resonated with health-conscious consumers. Coke Zero, for instance, delivered 8% volume growth in the quarter, outpacing Coke’s overall sparkling portfolio’s at 3% in the quarter. We expect Coke Zero, together with several low or no sugar versions of popular products including Sprite and Powerade, to help Coke maintain mind and wallet share amid increasing health-consciousness among soft drink consumers.