Is Buffett's Beverage Giant Still a Sweet Investment? Coca-Cola Beats Estimates and Deems Tariffs "Manageable"

Who's afraid of punitive tariffs?

Not Coca-Cola (NYSE: KO), it seems. The beverage titan -- and, by the way, longtime stock holding of Warren Buffett's influential Berkshire Hathaway -- just posted first-quarter results and stated the current trade war will have a negligible effect on its business. Let's take a glance at the quarter and dig into whether its shrug at the tariffs is justifiable.

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Flat Coke

Coca-Cola popped the tab on its Q1 results Tuesday morning, revealing that it earned net revenue of $11.1 billion. That was down by 2% on a year-over-year basis, although overall global case unit volume rose at the same percentage rate.

On the bottom line, the company's "comparable" (non-GAAP, or adjusted) net earnings inched up by 1% to $0.73 per share. The company did not, for some reason, provide total net income figures.

Regardless, the numbers published were more or less in the neighborhood of analyst estimates. Pundits tracking the stock were collectively modeling slightly higher revenue of $11.2 billion but underestimated adjusted earnings at $0.72 per share.

This most global of companies saw unit case volume grow in markets such as Europe, Middle East, and Africa (EMEA), where it notched a 3% improvement over the same quarter of 2024. It did even better in Asia Pacific; all global drink categories rose in the region, powering 6% overall growth. On the down side, the company flat-lined in Latin America and suffered a 3% drop in its native North America.

Talking about tariffs

But what's on the mind of many investors is not the state of the global beverage industry or the spending habits of Asian soft drink consumers. It's the effect of the tariffs that have been imposed by the current U.S. presidential administration, and the retaliatory levies fired back by the targeted nations.

In both its earnings release and the conference call that covered its Q1 performance, Coca-Cola sounded a confident note about its ability to endure the trade war. Within its full-year guidance, it set something of a tone by stating the conflict's impact on its business will be "manageable."

That's because, unlike companies that rely on inputs made abroad and imported, Coca-Cola's operations tend to source what they need locally.

In the conference call, CEO James Quincey said that "if we were to take the U.S., for example, we are exposed on a couple of inputs like orange juice or some of the dispensing equipment we buy. Our bottling system is a bit exposed to some of the resin and aluminum."

"But these are small pieces relative to the total size," he added.

Putting its guidance where its mouth is, management left most of its forecasts unchanged from the ones in the previous quarterly report. These included adjusted earnings-per-share growth of 2% to 3% over the $2.88 of 2024, and an adjusted cash-flow figure of roughly $9.5 billion.

Net revenue should experience a "currency headwind" of 2% to 3% in addition to slight negative impacts from acquisitions, divestitures, and "structural changes." That's actually an improvement over the previous guidance that anticipated 3% to 4%. Either way, at such rates, those factors won't have a crushing impact on the top line.

Hail to the beverage king

Like Buffett, who first loaded up on Coca-Cola for Berkshire's equity portfolio in 1988, I've been a longtime bull for the stock.

Q1 was forgettable, especially when compared with the solid growth the company posted in the previous frame. Still, the company is a powerhouse. It's got an unassailable moat as the No. 1 soft drinks purveyor in the world, and despite a flat quarter, it's still kicking out plenty of cash from its operations.

That gushing geyser of greenbacks allowed the most regal of Dividend Kings to recently declare a dividend raise. This amounted to 5% over the preceding one, a rather high figure given the long streak of lifts (now 63 and counting) plus the scope and scale of its business. The dividend currently yields 2.8%, which is well above the average yield of S&P 500 index component stocks.

While the tariff war rages, investors will be understandably worried about how it affects their equity holdings. With its limited exposure to trade hiccups, Coca-Cola looks very attractive as an investment, and it's likely folks will gravitate to it on that basis alone. I can imagine some people either ditching more tariff-impacted stocks in favor of the stock or building a new position with available capital.

Given that, plus the always-attractive dividend that's constantly on the rise, I'd give Coca-Cola shares a better-than-average chance of increasing in price during the trade war. The longer the tussle goes on, the more the company's appeal is sure to grow. As ever, I'd be a buyer of the stock -- especially now.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.