Coca Cola (NYSE:KO): We’ll happily drink to it – both as a drink and solid investment!

This week’s international stock deep dive is Coca Cola (NYSE:KO). It is one of the most famous brands in the world and has been a successful company. It is one of Warren Buffett’s favourite stocks.

It is easy to think it is a ‘set and forget’ company, but it is a growth stock with substantial opportunity ahead of it. At the same time, there are some risks.

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Why Warren Buffett likes it

It all comes down to his investment philosophy which is grounded in buying high-quality businesses with durable competitive advantages (or “economic moats”), and Coca-Cola checks all those boxes.

Its moats are its brand power, customer loyalty, enormous distribution network and its secret formula (more on that shortly). It is not just that all of these exist but they most likely will still exist and be strong decades from now.

Buffett also likes companies with consistent and growing earnings, as well as dividends and capital efficiencies. This company has shown reliable growth over many decades, amidst all conditions. it has grown dividends for over 60 years in a row, making it a member of the Dividend Aristocrats club.

The story of Coca Cola

Yes, everyone knows who Coca-Cola is. The company is based in Atlanta, Georgia and that is where it began in 1886. Pharmacist Dr. John Pemberton wanted an alternative for pain relief, so he created a syrup that mixed with carbonated water to form the familiar beverage known as Coca-Cola today. The name was chosen as an homage to the coca leaves and kola nuts he used as ingredients.

In 1899, Asa Candler purchased the rights to Coca-Cola from Pemberton and his partner for $2,300, launching the beverage into an incredibly successful business venture. Candler is credited with transforming Coca-Cola into a globally recognized brand by introducing it in bottling franchises across the United States. By 1916, Coca-Cola was being sold in every US state and more than twenty countries around the world.

Today, Coca-Cola products are sold in over 200 countries and has become a household name for billions of people around the globe.

But its more than Coke

2.2bn servings of drinks made by this company are sold in over 200 countries every single day. But don’t forget that it isn’t just the drink Coke. It has nearly 2 dozen alcohol brands, not to mention milk, bottled coffee and energy drinks. This provides further revenue streams to the company and customers that it otherwise wouldn’t have if it just sold Coke.

In a recent presentation, the company boasted that it had ’30 billion-dollar brands’. These include Sprite, several water brands including Dasani and Smartwater, as well as Powerade and Monster Drinks. Many of these were only introduced or acquired in the last 20 years.

These are to meet consumer preferences and to enhance its social license. Some concerns had by the public are the waste caused by drinks and dietary impacts. The company claims 68% of products have less than 100 calories per 12-ounce serving and 30% is low or no-calorie. 95% of its packaging is designed to be recycled and 62% of it was in 2023.

You always have to innovate.

What is next?

The company was been immune from margin compression out of COVID has held up relatively well, with margins still over 30%. With productivity being such a buzzword, it has boasted to have improved it by SG&A as a percentage of net revenues falling by 4% in 5 years and having a 93% adjusted FCF conversion ratio. And for those who loathe share buybacks as a waste of money, the company tends to only do so to offset dilution.

For 2025, it has guided to 5% organic revenue growth but expects a 1-2% forex headwind. It anticipates comparable currency neutral EPS growth of 8% and comparable EPS growth of 3%. Free cash flow is expected to be $9.5bn, not counting $2.2bn a ‘contingent consideration payment’ it has not elaborated on.

Analysts covering the company have a mid-teens percentage premium to the current share price – US$78.76 vs US$69.92. For 2025, they call for US$48.4bn revenue (compared to $46.9bn in 2024) and the same EPS guidance. In 2026, $51.2bn revenue and $3.12 EPS (4% growth). The company’s P/E for 2026 is 21.7x, but its PEG is 3.9x.

Coke will remain a beverages power house

Coca-Cola is one of the most successful soft drink companies in the world today, continuing to offer its customers a wide variety of cola and other beverages. With products spanning more than 200 countries and regions, Coca-Cola is sure to remain a powerful force in the global beverage industry for years to come. And for this reason, we think there’s no reason why it cannot continue to create value for its investors.