Can Coca-Cola Stock Keep Beating the Market?

Core Viewpoint - Coca-Cola is experiencing unusual popularity among investors this year, outperforming the market, primarily due to its stability and protection against tariffs, despite the overall market rise [1][2]. Company Performance - Coca-Cola is the largest beverage company globally, with trailing-12-month sales of $47 billion, but it is not considered a growth stock [4]. - The company has historically underperformed the market over the past 30 years, with notable exceptions during market downturns when it benefited from a flight to safety [5]. - Recent restructuring has improved Coca-Cola's position, allowing it to report record figures again, similar to its performance a decade ago [8]. Financial Metrics - In the second quarter of 2025, Coca-Cola reported a 1% year-over-year revenue increase, with organic revenue growth of 5% [9]. - The operating margin improved to 34.1%, up from 21.3% the previous year, while adjusted operating margin rose to 34.7% from 32.8% [9]. - Comparable earnings per share (EPS) increased by 4% to $0.87, surpassing Wall Street's expectations of $0.84 [9]. - Revenue growth aligns with the company's long-term goal of 4% to 6%, but EPS fell short of the 7% to 9% target [10]. - Adjusted operating income increased by 15%, exceeding the long-term goal of 6% to 8% [10]. Valuation - The stock currently trades at a price-to-earnings (P/E) ratio of 27, slightly above its three-year average, indicating that significant growth is needed to justify a higher valuation [11]. Investment Appeal - Despite the narrowing gap with the market, Coca-Cola's stock is up 13% this year compared to the market's 8% [12]. - The primary attractions for investors are the stock's security and value, bolstered by a reliable dividend that has been raised for 63 consecutive years, yielding 2.9% [13].