The Coca-Cola Company KO has seen its shares rally 6.7% since reporting solid fourth-quarter 2024 results on Feb 11. 2025. Meanwhile, the broader industry has returned 4%, the Consumer Staples sector has risen 1% and the S&P 500 index has inched up 0.7% in the same period.

Coca-Cola's stock performance also reflects outperformance compared with its close competitors, including PepsiCo Inc. PEP, which has lost 0.7% in the same period. Also, KO shares have outpaced Monster Beverage MNST and Keurig Dr Pepper’s KDP gain of 3% and 2.4%, respectively.

At the current price of $68.87, the KO stock trades at a 6.3% discount from its 52-week high of $73.53. This indicates that the stock has further upside potential.

Coca-Cola’s Stock Performance

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KO trades above its 50 and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in Coca-Cola’s financial health and prospects.

KO Stock Trades Above 50 & 200-Day Moving Averages

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Let us further review Coca-Cola’s fourth-quarter results, outlook and other factors to assess if the stock presents a buying opportunity after the rally.

Coca-Cola’s Q4 Results Reflect Strength

KO delivered strong results in the fourth quarter, showcasing its resilience and global growth. In the fourth quarter, the company reported year-over-year revenue and earnings growth, beating estimates. Earnings per share (EPS) rose 12% year over year, whereas net sales advanced 6%. Organic revenues grew 14% from the prior-year quarter, whereas comparable currency-neutral earnings per share rallied 23% year over year.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

KO’s top and bottom lines benefited from continued business momentum, aided by improved pricing across markets. The top line gained from revenue growth across all operating segments, except for Bottling Investments. An improved price/mix and a rise in concentrate sales also contributed to revenue growth.

In the reported quarter, concentrate sales moved up 5% year over year, and the price/mix improved 9%. The price/mix benefited from higher pricing in the markets facing intense inflation, which contributed 4 points to the improvement. Also, pricing actions across the marketplace and a favorable mix contributed to the rest of the increase. In the quarter, concentrate sales were 3 points ahead of the unit case volume, which grew 2%, mainly driven by two additional days and the timing of concentrate shipments.

KO’s Upbeat Forward Outlook

Management’s guidance for 2025 depicts optimism. The company anticipates organic revenue growth of 5-6%. Comparable currency-neutral EPS for 2025 is expected to increase 8-10% year over year. The company anticipates comparable EPS growth of 2-3% for 2025 from the $2.88 reported in 2024.

Upward Estimate Trajectory of Coca-Cola

The Zacks Consensus Estimate for KO’s 2025 earnings per share (EPS) increased 0.7% in the last seven days. The consensus estimate for 2026 EPS rose 0.9% in the past seven days. The upward revision in earnings estimates indicates analysts’ confidence in the stock.

For 2025, the Zacks Consensus Estimate for KO’s sales and EPS implies 2% and 2.8% year-over-year growth, respectively. The consensus mark for 2026 sales and earnings suggests 5% and 8% year-over-year growth, respectively.

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Challenges Facing KO

Coca-Cola remains vulnerable to macroeconomic disruptions. These include low consumer confidence in China, geopolitical and economic challenges in Eurasia and the Middle East, and high inflation in Argentina, all of which could affect revenues.

Management notes that inflation is beginning to stabilize in developed markets, but many developing and emerging markets still face significant inflationary pressures, leading to higher prices. Also, currency fluctuations might pose challenges in certain regions.

Based on the current rates and including the impacts of hedged positions, the company expects currency headwinds to impact 2025 revenues by 3-4%. Additionally, acquisitions, divestitures and structural changes are expected to slightly impact revenues in 2025. Comparable EPS growth is expected to include currency headwinds of 6-7%, and a marginal impact of acquisitions, divestitures and structural changes.

For first-quarter 2025, comparable revenues are expected to include a 3-4% currency headwind, and a 2-3% negative impact of acquisitions, divestitures and structural changes. Comparable EPS is estimated to include a 5-6% currency headwind, and a 2-3% negative impact of acquisitions, divestitures and structural changes.

Coca-Cola’s Premium Valuation

KO commands a high valuation, reflecting its strong market positioning, brand power and long-term growth potential compared with other non-alcoholic beverage companies. We believe that the stock is overvalued at current levels.

Coca-Cola trades at a significant premium to industry peers with a forward 12-month price-to-earnings (P/E) multiple of 23.05X. The current valuation is below its five-year median of 26.61X and has surpassed the broader industry’s multiple of 18.25X.

The company’s ability to deliver on its promise of offering something for everyone to drink, with a focus on innovation and digital expansion, is crucial. While success in these areas can strengthen its market leadership, failure can pose serious challenges for this soft drink giant. At this moment, its current valuation seems unwarranted. KO has a Value Score of F.

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Should You Buy KO Stock?

Coca-Cola looks well-poised for long-term growth, driven by its innovation, marketing and digital initiatives. KO’s strong market position and focus on meeting consumer preferences are significant strengths. While the stock’s overvaluation can be linked to the company's long-term growth potential, supported by strong profitability and global expansion, exposure to macroeconomic challenges and persistent inflationary pressures remain concerning.  

Maintaining a position in the Coca-Cola stock appears to be a prudent choice at this time. While the company remains a compelling option for long-term investors, its ability to navigate current challenges will be key. Prospective investors should carefully assess its valuation, but for existing shareholders, retaining this Zacks Rank #3 (Hold) stock is a sensible decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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CocaCola Company (The) (KO) : Free Stock Analysis Report

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