Coca-Cola Share Price Could Hit Multi-Decade High After Earnings
It could be game on for Coca-Cola buys if the shares hold this key level.
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Coke and a smile?
Well, at least a positive reaction to Tuesday morning's earnings. Let's get into that. On Tuesday morning, the Coca-Cola Company KO released the firm's fiscal fourth quarter financial results.
For the period that ended December 31, 2024, "Coke" posted an adjusted EPS of $0.55 (GAAP EPS: $0.51) on revenue of $11.544 bilion. These top- and bottom-line financial results both beat Wall Street's expectations, while that sales print was good enough for year-over-year growth of 6.5%.
Organic revenue growth, which excludes sales made by newly-acquired brands or assets, was good for 14% over the same period a year ago. Global unit case volume grew 2%, as the firm gained market share both for the quarter and for the full year across the total nonalcoholic ready-to-drink beverage space.
Coca-Cola Operations
While revenue was growing 6.5%, the cost of goods sold actually contracted just a smidgen to $4.613 billion. This left a gross profit of $6.913 billion (+12%), as GAAP gross margin improved from 57.3% to 60%.
After accounting for operating expenses that were up slightly more than 7%, GAAP operating income printed at $2.709 billion, up 19% from the year-ago comparison. GAAP operating margin improved from 21% a year ago to 23.5%. Once we bring in interest, other income and expenses as well as taxes, GAAP net income attributable to shareholders landed at $2.195 billion (+11%). This works out to $0.51 per fully-diluted share. Adjusted net income grew 11.7% to $2.381 billion, which works out to $0.55 per fully-diluted share.
Coca-Cola Business Unit Performance
- Europe, Middle East and Africa: Net revenue increased 6%, as organic revenue increased 17%, as operating income grew 2%. Adjusted for currency, operating income would have grown 14%.
- Latin America: Net revenue increased 10%, as organic revenue increased 25%, as operating income grew 24%. Adjusted for currency, operating income would have grown 46%.
- North America: Net revenue increased 16%, as organic revenue increased 15%, as operating income grew 29%. Adjusted for currency, operating income would have grown 26%.
- Asia Pacific: Net revenue increased 9%, as organic revenue increased 1%, as operating income grew 24%. Adjusted for currency, operating income would have "grown" -6%.
- Global Ventures: Net revenue increased 5%, as organic revenue increased 3%, as operating income grew 14%. Adjusted for currency, operating income would have grown 9%.
- Bottling Ventures: Net revenue contracted 23%, as organic revenue increased 7%, as operating income grew 8%. Adjusted for currency, operating income would have "grown" -3%.
Coca-Cola Stock Fundamentals
For the full fiscal year, Coke generated operating cash flow of $6.805 billion. Out of that number came capex spending of $2.064 billion, leaving free cash flow of $4.741 billion. Now, that was down 51% from 2023. However, the firm did make an IRS litigation deposit of $6.041 billion. Without that deposit, free cash flow would have been up 11%, so this may not be as alarming as it looks. Out of that free cash, the firm repurchased $1.795 billion worth of common stock for its corporate treasury and paid out $8.359 billion in cash dividends to shareholders. That fits a lot more neatly into the "adjusted" free cash flow than it does the actual free cash flow (which is an adjusted number to begin with).
Turning to the balance sheet, Coke ended the quarter with a cash position of $14.571 billion and inventories of $4.728 billion. This placed current assets at $25.997 billion. Current liabilities add up to $25.249 billion, which includes a very small amount of shorter-term debt. That puts the firm's current and quick ratios at 1.03 and 0.84. Not great numbers, but passable, in the way a C+ still lets you play varsity sports although it ticks off your parents.
Total assets amount to $100.549 billion including goodwill of $18.139 billion and trademarks with indefinite lives of $13.301 billion. Intangibles at 31% of total assets are within large-cap norms and not alarming. Total liabilities less equity comes to $74.177 billion, including long-term debt of $42.375 billion. I don't love the size of the debt load, but it is manageable. This balance sheet is not awful and, in my opinion, in better shape than is the balance sheet of arch rival PepsiCo PEP.
Guidance
For the current quarter, the firm did not provide precise guidance with the exception of expecting net revenues to suffer a 3% to 4% currency related headwind based on current rates that would put a 5% to 6% negative impact on adjusted earnings per share.
For the full year 2025, Coke is looking for organic revenue growth of 5% to 6%, and a negative currency related impact to revenues of 3% to 4%. Adjusted EPS is seen growing 2% to 3% year over year from $2.88 in 2024. Wall Street was looking for something closer to 3.4% growth, so this is on the light side. Free cash flow is seen at roughly $9.5 billion excluding a Fairlife LLC consideration payment.
My Thoughts on Coca-Cola Stock
This was a solid quarter for Coke. The guidance wasn't strong on growth, but under normal circumstances, this firm is a cash flow beast, and it does return capital to shareholders via both share buybacks and dividend (3% yield) payments. On top of that, the company is in better fundamental shape than its key competitor.
Coke is in pretty decent technical shape. On Tuesday morning's gap up open, the stock recaptured its own 200-day SMA, which likely has portfolio managers increasing long-side exposure. The stock also took down the "half-way" back or 50% retracement level of the early September through early January sell-off.
The stock could hit some resistance at the 61.8% Fibonacci retracement level ($68.60), but with both relative strength and the daily MACD postured bullishly, that's no sure thing. There is a chance that in the coming days the unfilled gap just created could be tested. If Monday's high (or better) holds a support, it could be game-on for Coca-Cola.
In my opinion, holding the 200-day line could open the door to a per share price of roughly $78, which would be a multi-decade high. This stock would be a key holding for someone building a portfolio focused on the staples.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
