After Earnings, Is Coca-Cola Stock a Buy, a Sell, or Fairly Valued?

Coca-Cola KO released its fourth-quarter earnings report on Feb. 10. Here’s Morningstar’s take on Coca-Cola’s earnings and stock.

Key Morningstar Metrics for Coca-Cola

• Fair Value Estimate: $74.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Low

What We Thought of Coca-Cola’s Q4 Earnings

Coca-Cola’s organic revenue rose 5% in 2025, driven by 4% growth in price/mix and a 1% volume increase. Adjusted operating profit grew 6.6%, as margin expanded 120 basis points to 31.2%, and adjusted earnings per share grew 4.2% to $3.

Why it matters: Despite macro and geopolitical challenges, Coca-Cola managed to increase sales in line with its mid-single-digit long-term target, thanks to steadfast brand investments and its total beverage strategy. We expect zero-sugar soda offerings and functional drinks to be priorities in the coming years.

• Innovation focus, consumer insights, and commercial execution continue to underpin a favorable outlook. We expect the bulk of growth to come from the company’s 32 billion-dollar brands (75% nonsoda), including the latest additions of Innocent in the UK and Santa Clara in Mexico.
• Incoming CEO Henrique Braun prudently emphasized the value focus via price pack architecture and lower entry price points. These efforts should help reinforce consumer relationships for the longer term, but we expect 2026 volume to be soft, given sluggish demand in India, China, and Mexico.

The bottom line: We don’t plan any material change to our $74 fair value estimate for wide-moat Coca-Cola other than a time value adjustment. We view the shares as fully valued after an 11% run year to date versus the 2% rise in the Morningstar US Market Index.

• We hold our 6% growth forecast for 2026 sales (which aligns with management’s outlook) but will trim our $3.32 adjusted EPS estimate by a low-single-digit percentage on higher marketing costs. Our 10-year estimates for 5% average sales growth and 31% average operating margin are intact.
• While net leverage is low at 1.6 times and we model $13 billion in free cash generation for 2026, major acquisitions look unlikely in the near term. We expect the focus to be on turning around the Costa chain after Coke failed to sell the assets at a rumored valuation of half of the acquisition cost.

Fair Value Estimate for Coca-Cola

With its 3-star rating, we believe Coca-Cola’s stock is fairly valued compared with our long-term fair value estimate of $74 per share, which implies a 22 times multiple against our adjusted 2026 earnings estimate and a 2026 enterprise value/adjusted EBITDA multiple of 19 times.

Despite macro headwinds in key markets, including the United States, Mexico, and China, Coke delivered 1% volume growth thanks to product innovation, consumer engagement, and agile in-market execution. We view its 2%-3% long-term volume growth target as feasible. We expect health-focused innovation to remain a priority, with Coke doubling down on zero-sugar recipes and functional benefits including protein and fiber.

Read more about Coca-Cola’s fair value estimate.

Economic Moat Rating

We believe Coca-Cola has built a wide economic moat around its global beverage operations based on strong intangible assets and a significant cost advantage that will enable the company to deliver excess investment returns above its cost of capital over and beyond the next 20 years.

We have modeled the company to generate returns on invested capital, including goodwill, that average 38% throughout the duration of our 10-year explicit forecast, comfortably surpassing our estimate of its weighted average cost of capital at 7%. As the world’s best known beverage company, Coca-Cola owns a strong portfolio of storied and iconic brands that resonate with consumers around the world, making its products the beverage of choice on both at-home and away-from-home consumption occasions.

Read more about Coca-Cola’s economic moat.

Financial Strength

We believe Coca-Cola has a strong balance sheet and ample liquidity to weather macroeconomic volatilities and invest for long-term growth. The company had $14 billion in cash and short-term investments on its balance sheet as of September 2025, $4.6 billion in unused backup lines of credit for general purpose use, and a well-established commercial paper program in the US enabling the firm to consistently access short-term funding at low rates.

Leverage is manageable, with net debt/adjusted EBITDA at 2 times in 2024, within its long-term target of 2 to 2.5 times. We expect the metric to hold at low levels in coming years.

Read more about Coca-Cola’s financial strength.

Risk and Uncertainty

We assign a Low Uncertainty Rating to Coca-Cola. We view long-term bottler alliance as crucial to its business model and return profile, but in periods of high inflation, these relationships could be pressured as the bottlers tend to bear the brunt of cost increases. This is less of an issue in the US, where local bottlers are small and have limited bargaining power, but in emerging markets—which hold the key to healthy volume growth—Coca-Cola faces much larger bottlers, such as Arca Continental and Coke Femsa, that are likely in a better position to negotiate.

Nonalcoholic beverage demand tends to be resilient through economic cycles. However, Coke has high exposure to international markets (over two thirds of both revenue and profits) that leads to stepped up volatility within its operations—resulting from shifting macroeconomic and regulatory landscapes, currency fluctuation, and geopolitical risks—compared with domestically focused peers. The international experience of management combined with bottler collaboration globally can help the firm navigate these challenges.

Read more about Coca-Cola’s risk and uncertainty.

KO Bulls Say

• Coke can leverage strong bottler relationships in underpenetrated emerging markets to drive volume growth with classic recipes as well as new products tailored to local tastes.
• Heavy investments in a digitalized supply chain and data analytics have better aligned Coke and its bottlers in product planning, manufacturing, and go-to-market strategy.
• As Costa recovers from the pandemic-related disruptions, it should gain a firmer footing in the coffee category and provide more consumer insights given its global footprint.

KO Bears Say

• Secular headwinds in carbonated soft drink demand in developed markets are a challenge to Coca-Cola’s long-term growth outlook.
• The company’s brand portfolio and product lineup in nonsparkling categories are less robust, and heavy investments are needed to bolster its competitive position.
• With two-thirds of revenue from international markets, Coke faces constant currency fluctuations that drive volatilities in reported earnings.

This article was compiled by Rachel Schlueter.