Shares of The Coca-Cola Company KO hit a new 52-week high of $73.95 yesterday before dropping to close trading at $73.18. At close, the company’s stock reflected a day’s gain of 2.6%. KO's current rally stands out as its peers, including PepsiCo Inc. PEP, Keurig Dr Pepper Inc. KDP, and Monster Beverage Corporation MNST, grapple with challenges from tariffs on aluminum and steel imports imposed by President Donald Trump's administration. These tariffs have notably impacted the soft drink industry.

KO has seen its shares rise steadily in the past year, driven by resilient business trends on a strong brand portfolio, investments across the business and revenue growth across its operating segments. In the past year, KO shares have rallied as much as 23% compared with the broader industry’s 3.5% rise and the Zacks Consumer Staples sector’s 10% growth. The stock also outpaced the S&P 500 index’s 9.5% jump in the same period.

Coca-Cola's performance is notably stronger than that of its closest competitor, PepsiCo, which has recorded a decline of 10.5% in the past year. KO surpassed other industry peers, including Keurig Dr Pepper and Monster Beverage’s growth of 15.8% and 6.7%, respectively.

KO’s One-Year Stock Performance

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Coca-Cola’s technical indicators reflect positive sentiment. The stock is trading above its 50-day and 200-day moving averages, signaling strong upward momentum and price stability. This technical strength indicates positive market sentiment and confidence in the leading beverage behemoth’s financial health and prospects.

Coca-Cola's Trades Above 50 & 200-Day Moving Averages

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Is the KO Stock Poised for Continued Momentum?

Coca-Cola is well-positioned for sustained growth, leveraging its strong market presence, diverse product portfolio and solid financial performance. With above 40% of the non-alcoholic beverage market, the company offers more than 4,700 products across 500 brands, spanning traditional sodas, energy drinks and healthier alternatives. This vast portfolio reflects Coca-Cola’s adaptability to shifting consumer preferences and its commitment to innovation.

As part of its transformation into a total beverage provider, KO continues to refine its core offerings while expanding into high-growth segments. The company’s focus on healthier options and energy drinks has resonated with consumers, driving notable successes such as a 13% volume increase for Coca-Cola Zero Sugar in the fourth quarter of 2024. This strategic shift aligns with the broader trend toward reduced-sugar beverages and functional drinks, reinforcing KO’s competitive edge.

Coca-Cola's innovation strategy balances short-term excitement with long-term expansion. Limited-time collaborations like the Coke and OREO launches generate buzz, while sustained investments in brands such as Fuze Tea have led to retail value growth three times faster than the broader tea category. These efforts fueled a 6% increase in net revenues, reaching $11.5 billion in the fourth quarter of 2024, demonstrating the effectiveness of Coca-Cola’s brand-building approach.

To capitalize on e-commerce expansion, KO is strengthening its digital ecosystem, with online sales doubling in several markets. Investments in advanced digital platforms allow seamless integration of marketing, sales and distribution across both online and offline channels. Initiatives like Studio X, which enhances content production and real-time performance tracking, have driven impressive results, contributing to a $40-billion retail sales increase for Trademark Coca-Cola in the past three years.

Looking into 2025, the company remains confident in its balanced growth strategy. With inflation-driven pricing pressures easing, KO expects organic revenue growth of 5-6% and an 8-10% rise in comparable currency-neutral EPS. Additionally, Coca-Cola has effectively mitigated tariff-related risks by leveraging its localized supply chain and diversified packaging strategy.

By producing most of its U.S. beverages domestically and shifting between aluminum cans and PET bottles as needed, the company has minimized exposure to trade disruptions, reinforcing its resilience in a challenging economic environment.

KO’s Estimate Revision Trend

The Zacks Consensus Estimate for Coca-Cola’s 2025 and 2026 EPS has been unchanged in the last 30 days. However, revenue and EPS estimates for 2025 and 2026 indicate year-over-year growth.

For 2025, the Zacks Consensus Estimate for KO’s revenues and EPS implies year-over-year growth of 2% and 2.8%, respectively. The consensus mark for 2026 revenues and EPS indicates 5.1% and 8.1% year-over-year growth, respectively.

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

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Is KO’s Premium Valuation Justified?

Coca-Cola undoubtedly commands a high valuation, reflecting its strong market positioning, brand power and long-term growth potential compared with other non-alcoholic beverage companies. However, we believe that its valuation is too stretched at this time.

KO trades at a significant premium to industry peers with a forward 12-month price-to-earnings (P/E) multiple of 24.24X. The current valuation is below its five-year median of 23.5X and has surpassed the broader industry’s multiple of 19.17X.

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At 24.24X forward 12-month P/E, Coca-Cola’s valuation is much higher than that of its competitors, such as PepsiCo, Keurig Dr Pepper and Monster Beverage, which trade at more reasonable multiples. This raises concerns about whether KO is a justified buy at current levels. A high P/E ratio, with its low Value Score of F, adds to investor unease.

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 could strengthen its market leadership, failure could pose serious challenges for this soft drink giant. At this moment, its current valuation may seem unwarranted.

Can Coca-Cola’s Success Face Hurdles?

KO has been exposed to macroeconomic challenges, including weakened consumer confidence in China, geopolitical tensions in Eurasia and the Middle East, and persistent inflation in Argentina, all of which could pressure revenues.

While inflation is stabilizing in developed markets, many emerging and developing regions continue to face inflationary pressures, driving higher prices. Additionally, currency fluctuations could create headwinds in certain markets, impacting overall financial performance.

Management anticipates currency headwinds to reduce 2025 revenues by 3-4%, factoring in current exchange rates and hedged positions. Structural changes, including acquisitions and divestitures, are also expected to impact revenues slightly. Comparable EPS growth is projected to face a 6-7% currency headwind, along with a marginal impact of acquisitions and divestitures.

For the first quarter of 2025, comparable revenues are expected to reflect a 3-4% currency headwind and a 2-3% negative impact of structural changes. Comparable EPS is projected to face a 5-6% currency headwind, with acquisitions and divestitures weighing on results by 2-3%.

Do KO’s Growth Potential Outweigh Its Risks ?

Coca-Cola has reached a milestone, with its stock attaining new highs, reflecting its strong market position, diverse product portfolio, and commitment to innovation and digital expansion. These factors position KO for sustained long-term growth. However, near-term challenges, such as inflationary pressures, macroeconomic uncertainty in key regions, tariff concerns, and unfavorable currency fluctuations, continue to pose risks.

Despite these headwinds, Coca-Cola remains a compelling choice for long-term investors, backed by its strong profitability and expanding global footprint. The company’s proactive strategies to navigate economic volatility will be crucial in maintaining momentum.

For prospective investors, assessing the current valuation is essential, given the stock’s recent rally. However, for existing shareholders, retaining this Zacks Rank #3 (Hold) stock appears to be a prudent decision, considering its resilience and long-term growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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