ii view: Costa gives Coca-Cola profits a boost

Third-quarter results to 26 Sept  

• Revenue up 5% to $12.46 billion
• Adjusted earnings up 6% to $0.82 per share
• Quarterly dividend payment of $0.51 per share, unchanged from the previous quarter

Guidance: 

• Continues to expect full year adjusted earnings per share growth of 3%

Chief executive James Quincey said:

“While the overall environment has continued to be challenging, we’ve stayed flexible — adapting plans where needed and investing for growth.” 

“By offering choice across our total beverage portfolio and leveraging our franchise model’s unique strengths, we’re gaining ground and strengthening our leadership position. We’re confident we can deliver on our 2025 guidance while also working to achieve our longer-term objectives.”

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ii round-up:

Drinks giant Coca-Cola Co (NYSE:KO) today detailed adjusted earnings that beat Wall Street forecasts with a 1% gain in volume demand reversing a 1% fall the previous quarter. 

Third-quarter adjusted revenues rose 5% to $12.46 billion, driven by a 3% increase in demand for waters, sports drinks and tea and coffee brands such as smartwater, Powerade, Costa and Fuze Tea. Adjusted earnings up 6% from a year ago to $0.82 per share surpassed analyst forecasts for $0.78 per share. 

Shares in the Dow Jones company rose 3% in US trading having come into these latest results up by close to a tenth so far in 2025. That’s similar to the Dow index itself. Arch-rival PepsiCo Inc (NASDAQ:PEP) is little changed year-to-date. 

Coca-Cola’s numerous brands include Fanta, Sprite and juice brand Innocent. Today’s results came on the same day as UK stock market listed bottling operation Coca-Cola HBC AG (LSE:CCH) agreed to buy a 75% stake in an African counterpart for $2.6 billion, creating the world's second-largest Coca-Cola bottling partner by beverage volume.

Despite making soft drink beverages, Atlanta headquartered Coca-Cola outsources the bottling of its drinks to providers such as Coca-Cola HBC and world’s biggest bottler by volumes - Mexico headquartered Coca-Cola Femsa SAB de CV ADR (NYSE:KOF).

Increased consumer demand across Europe, the Middle East and Africa countered flat volumes for both the drink maker’s home North American and Latin markets during the quarter.  

The soft beverage giant previously declared a quarterly dividend of $0.51 per share, unchanged from the previous quarter and payable to eligible shareholders on 15 December. 

Fourth-quarter and full-year results are likely to be announced mid-to-late January. 

ii view:

Started in 1886, Coca-Cola together with its bottling partners, employs more than 700,000 people. Currently, 30 of the group’s brands generate annual sales of $1 billion or more, half of which the company has grown from a starting position. Geographically, North America remains its biggest region, generating close to 40% of 2024 revenues. 

For investors, accompanying management comments flag an overall ‘challenging’ environment. Geopolitical tensions previously caused the company to exit Russia. A share price-to-net asset value ratio above the three-year average may suggest the shares are not obviously cheap, while the sizeable proportion of sales generated overseas regularly sees it battling currency headwinds.

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More favourably, product and geographical diversity remain high. More than 10 brands have previously been acquired and then driven to generate annual sales of over $1 billion. Market share gains continue to be flagged, while more than 30 years of consecutive annual dividend increases and forecast income yield of around 3% underline a focus on shareholder returns. 

For now, and despite ongoing risks, a consensus analyst fair value estimate above $77 per share points to continuing longer-term optimism on Wall Street. 

Positives: 

• Brand strength
• Progressive dividend policy

Negatives:

• Heightened geopolitical tensions
• Currency volatility

The average rating of stock market analysts:

Buy