Is Coca-Cola Co a Buy After Its Latest Earnings Report?

Coca-Cola (NYSE: KO) just did it again.

The beverage giant blew past estimates in its second-quarter earnings report, showing why it’s been one of the most reliable stocks on the market for a century.

Organic revenue jumped 6% as the company benefited from volume growth, a successful marketing push that included a World Cup sponsorship, strategic pricing, and a 16% volume surge in Coca-Cola Zero Sugar, which seemed to benefit from increased adoption of GLP-1s.

Overall revenue rose 7% to $13.4 billion, edging past estimates at $13.17 billion.

New CEO Henrique Braun said, ”While we continue to see a dynamic consumer landscape, we leveraged our powerful brands and system to gain value share, delivering revenue, profit, and earnings growth while also investing in the long term.

Adjusted operating margin ticked up from 34.7% to 35.6%, and adjusted earnings per share grew 11% to $0.97, topping expectations at $0.93. Management also lifted its guidance, calling for organic revenue growth of 5%, up from a previous range of 4%-5%, and it now sees adjusted EPS growth of 9%-10%, compared to a prior range of 8%-9%.

The results and updated guidance were enough to send the stock up as much as 7.3% today, pushing it to an all-time high. Coca-Cola has been on a tear this year, as the stock is now up 26%, outperforming the S&P 500 with no exposure to a potential AI bubble.

Coca-Cola is also trouncing rival PepsiCo this year, which is essentially flat, as the two have bifurcated starting in May, as the chart below shows.

KO data by YCharts

Pepsi’s growth has also been more sluggish, with organic revenue growth of just 2.5% through the first half of the year.

Image source: The Motley Fool.

Is Coca-Cola a buy?

Coca-Cola has long been a favorite of dividend and value investors, including Warren Buffett, whose Berkshire Hathaway has owned the stock since 1988, and it’s easy to see why.

Coca-Cola has an arsenal of top beverage brands, including its namesake, Diet Coke, Sprite, Fanta, Minute Maid, and a wide range of other beverage brands across bottled water, sports drinks, teas, juices, and even coffee following its acquisition of Costa Coffee, the U.K- based international coffeehouse chain.

As a Dividend King, a company that has raised its dividend for at least 50 years in a row, Coca-Cola is also among the most reliable dividend payers on the market. The company has raised its dividend for 64 consecutive years, and now offers a dividend yield of 2.5%, even with the stock up 26% this year, typically raising it by 4%-5% annually.

Coca-Cola is also a classic recession-proof stock, another reason investors like Warren Buffett favor it. Consumers buy its beverages in good times and bad, and its brand power and marketing muscle, including relationships such as its World Cup sponsorship, should ensure it remains the top soft drink company by market share worldwide.

The company is executing as effectively as it has in years. For income investors and other looking for a reliable, defensive stock, Coca-Cola remains a buy.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.