Coca-Cola Earnings: Focus on Volume Expansion Good for Long-Term Sales and Profit Growth

Despite intense competition, we think the firm remains well-positioned to capture growth in the coming years.

Dan Su, CFA 14 February, 2024 | 7:53AM
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Coca-Cola bottles are seen in this photo.

Key Morningstar Metrics for Coca-Cola

What We Thought of Coca-Cola’s Earnings

We don’t plan any material changes to our US$60 fair value estimate for Coca-Cola KO after digesting its 2023 results, as its sales growth of 6% and adjusted earnings of $2.69 per share matched our estimates. Despite a softening consumer backdrop and intense competition in the beverage aisle, we think the firm remains well-positioned to capture growth in the coming years, thanks to heavy investments in innovations and brands, as well as deft in-market executions that assert its competitive standing globally.

For 2024, we view management’s outlook for mid-single-digit sales growth as reasonable after adjusting for the impact of refranchising, but we plan to trim our adjusted EPS estimate by a low-single-digit percentage due to worse-than-expected near-term currency headwinds. Our 10-year projections for mid-single-digit sales growth and low-30s average operating margins remain in place.

Impressively, Coke delivered organic revenue growth of 12% in 2023 based on a broad-based, 2% beverage volume expansion, better than the 1% contraction at PepsiCo PEP. We attribute the volume resilience to the firm’s consumer-valued innovations in ingredients, formulas, and packaging, as well as smart digital marketing that resonates with consumers globally.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Coca-Cola Co64.77 USD-0.80Rating
PepsiCo Inc167.66 USD-1.00Rating

About Author

Dan Su, CFA

Dan Su, CFA  Dan Su, CFA, is a senior stock analyst with Morningstar.

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