MW Why Trump's aluminum tariffs won't 'radically change' Coke's packaging plans

By Tomi Kilgore

Coca-Cola's stock is having its best day in more than two years after Q4 revenue beat by a wide margin, as sale volume returned to growth

Shares of Coca-Cola Co. were having their best day in more than two years on Tuesday, after the beverage giant reported a surprise increase in quarterly revenue, as unit case volume returned to growth and prices continued to rise.

The company brushed off concerns about how tariffs announced by the Trump administration might affect costs and change business plans.

The stock $(KO)$ ran up 3.3% in midday trading, enough to pace the Dow Jones Industrial Average's DJIA gainers. It was also headed for the highest close since Oct. 28, and for the biggest one-day gain since it rallied 3.6% on Nov. 10, 2022.

When asked on the post-earnings call with analysts whether aluminum tariffs might push the company to change its packaging, more toward plastic and less toward aluminum cans, Chief Executive James Quincey said.

"I think we're in danger of exaggerating the impact of the 25% increase in the aluminum price relative to the total system," he said. "It's not insignificant, but it's not going to radically change a multibillion-dollar U.S. business."

Quincey said packaging is only a small component of total costs, so while tariffs can be considered a problem, they are a manageable problem.

"I don't think we should ... conclude that this is some huge swing factor in the U.S. business," Quincey said.

And when asked what changes the company may make in reaction to potential broader regulatory changes with the new Trump administration, Quincey said it's hard to make concrete plans when there's so much uncertainty.

Basically, "there are many things that could happen out there in the world" so the company is "scenario planning" for many potential outcomes.

"We will adapt as and whey they come," Quincey said.

More specifically, he was asked if the growth in GLP-1 weight-loss drugs has led to any changes in strategy. While Quincey said there has been evidence that GLP-1 usage has led people to drink "slightly less alcohol," he said so far it hasn't been a big factor for the overall, or nonalcoholic beverage industry.

Revenue surprisingly rose, beating by wide margin

Meanwhile, the company reported net operating revenue for the fourth quarter to Dec. 31 that grew 6.4% from a year ago, to $11.54 billion from $10.85 billion.

Excluding nonrecurring items, comparable revenue rose to $11.40 billion from $10.95 billion, while the FactSet consensus called for a decline to $10.68 billion. That was the widest margin for a top-line beat since the second quarter of 2022, based on FactSet data.

Unit case volume was up 2%. In the previous quarter, case volume had fallen 1% to snap a six-quarter streak of growth.

The increase in overall case volume was driven by growth in North America, Asia Pacific and Latin America, as increases in sparkling soft drinks, water, sports, coffee and tea offset declines in juice, value-added dairy and plant-based beverages.

Price and mix rose 9% in the latest quarter, to mark the 11th-straight quarter of increases of at least 9%.

In North America, unit case volume rose 1%, amid growth in sparkling flavors, Trademark Coca-Cola, juice, plant-based beverages and value-added dairy.

Price/mix increased 12%, boosted by "pricing actions in the marketplace."

Net income for the quarter to Dec. 31 grew to $2.2 billion, or 51 cents a share, from $1.97 billion, or 46 cents a share, a year ago.

Excluding nonrecurring items, such as asset impairments and tax matters, adjusted earnings per share grew 12% to 55 cents, above the FactSet consensus of 52 cents. That marked the 21st straight quarter of bottom-line beats.

Looking ahead, the company expects full-year 2025 adjusted EPS to increase by 2% to 3% from 2024, while the current FactSet consensus of $2.95 implies 2.4% growth.

Truist analyst Bill Chappell reiterated his buy rating on the stock after the results and kept his price target at $80, which implies about 20% upside from current levels.

"In short, [Coca-Cola's stock] looks like one of the safest plays in what has become a minefield of challenges for the broader consumer-staples group, due to GLP-1, tariffs, FX and other issues," Chappell wrote in a note to clients.

Coca-Cola's stock has tacked on 5.3% over the past three months, while the Consumer Staples Select Sector SPDR ETF XLP has slipped 0.5% and the Dow has edged up 0.5%.

-Tomi Kilgore

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February 11, 2025 11:53 ET (16:53 GMT)

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