Is It Wise to Buy Coca-Cola Pre-Q3 Earnings Amid Soft Volume Trends?

Core Insights - The Coca-Cola Company (KO) is expected to report third-quarter 2025 earnings on October 21, with anticipated year-over-year growth in both revenue and earnings [1][9]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for revenues is $12.4 billion, reflecting a 4.9% increase from the previous year [2]. - The consensus estimate for earnings is 78 cents per share, indicating a 1.3% growth from the prior-year quarter [2]. - The earnings estimate has increased by a penny in the last 30 days [2]. Performance Trends - Coca-Cola has shown consistent earnings outcomes, with a trailing four-quarter earnings surprise of 4.9% on average [3]. - The company has a Zacks Rank of 4 (Sell) and an Earnings ESP of -0.38%, indicating uncertainty regarding an earnings beat this quarter [4][3]. Market Challenges - The company is facing volume pressure in key markets, particularly in North America and Europe, due to changing consumer behavior and economic challenges [5]. - Low-income consumers are becoming more value-conscious amid inflation, leading to soft volumes [5]. - Currency headwinds are expected to impact revenues and earnings per share, with a 1% revenue headwind and a 5-6% EPS headwind anticipated [7][9]. Profitability Pressures - Rising tax burdens and elevated interest expenses are expected to pressure profitability, despite strong operational performance [8]. - The combination of higher taxes and financing costs could hinder net income growth amid ongoing volume softness [8]. Strategic Strengths - Coca-Cola's diverse brand portfolio and strategic investments are expected to support revenue growth, with a forecasted 6.9% year-over-year increase in organic revenues driven by an 8.2% rise in price/mix [12][10]. - The company has seen significant growth in e-commerce, with digital investments likely boosting third-quarter revenues [13]. Stock Performance and Valuation - KO shares have increased by 7.8% year to date, outperforming the broader industry and the Consumer Staples sector [14]. - The stock trades at a forward 12-month P/E multiple of 21.21X, above the industry average of 17.76X, indicating a potentially stretched valuation [18][19]. Long-term Outlook - Coca-Cola commands over 40% of the global non-alcoholic beverage market, supported by a strong market presence and innovation focus [20]. - Despite short-term challenges such as inflation and currency fluctuations, the company is well-positioned for sustained long-term growth [21]. - The upcoming earnings report is expected to reinforce Coca-Cola's resilience and growth outlook, making it a compelling long-term investment [22].