By Paul R. La Monica

The bull market has lost its pop this year. Shares of Coca-Cola still have some fizz.

Shares of the soft drink giant, which will report first-quarter earnings on April 29, are up nearly 18% so far this year and trading near a record high despite the turmoil on Wall Street. That makes Coke the top-performing stock in the Dow Jones Industrial Average.

It's also good news for Warren Buffett, given that Berkshire Hathaway is the company's biggest shareholder, with a stake of more than 9%. There's a good chance the Oracle of Omaha will talk about the stock -- and be swilling several cans of Coke on stage -- at Berkshire's annual shareholder meeting on May 3.

But is Coke, which now trades at about 25 times 2025 earnings estimates, a slightly higher forward price/earnings ratio than its five-year average, still a buy? The company remains bullish, despite worries about President Donald Trump's aluminum tariffs raising costs and concerns about the impact that popular GLP-1 weight loss drugs -- and the Make America Healthy Again movement -- are having on the intake of sugary beverages.

"We believe we can adapt to anything that comes at us," said CEO James Quincey on the company's February earnings call, when asked about changing consumer behavior as well as the possibility of tighter regulations from Health and Human Services Secretary Robert F. Kennedy Jr. that might hurt the company.

Wall Street agrees. Of the 29 analysts that cover Coke, 23 have a Buy on the stock. A big plus? Coke recognizes it needs to continue bolstering its portfolio of beverage brands beyond carbonated sodas. Hence, the big push into milk and protein shakes with Fairlife, the lactose-free dairy brand that Coke bought in 2020.

"Fairlife has performed exceptionally well and has been a key growth driver," wrote Jefferies analyst Kaumil Gajrawala, who noted that the opening of a new production facility in Western New York later this year will help add capacity. "The runway is long -- protein is one of the biggest secular growth stories in health and wellness."

Coke's dividend yield of 2.8% is another positive for investors who are probably worried about the volatility in both the bond and stock markets this year. Stable earnings growth, with estimates of about 5% annual earnings increases for the next few years, also helps. "We believe there is greater confidence in the company's ability to deliver on the bottom line," said UBS analyst Peter Grom, who has an $84 target on the stock, up almost 15% from a recent $73.28. Grom concedes that it's "likely a crowded long" heading into earnings, but he thinks Coke's sales and earnings visibility warrants the "outsized premium" to the rest of the consumer-staples sector as well as rivals like PepsiCo and Keurig Dr Pepper.

Jefferies' Gajrawala also cited Coke's international exposure as a reason to own the stock. Yes, it may make it more of a target for tariffs. But it also reduces some of the risks to Coke from any potential RFK Jr.-led crackdowns of the beverage industry. There's a reason Coke has performed so well this year. And that doesn't mean that its strong run has to end anytime soon.

Have a Coke and a smile.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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(END) Dow Jones Newswires

April 25, 2025 21:30 ET (01:30 GMT)

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