KO

Unlike some other businesses selling everyday consumer products, which recently lowered their annual projections for food or hygiene items, including PepsiCo (PEP) and Procter & Gamble (PG), Coca-Cola (KO) now issues a rather optimistic forecast on top of its solid quarterly results. Having profitably raised retail prices on the most substantial part of its product line, the beverage producer relied on resilient demand for its well-known sodas like Fanta and Sprite, juices and ultra-filtered milk offering Fairlife, made with about 50% more protein and 50% less sugar, compared to regular milk products.

In Q1, the giant company earned $0.73 per share, compared with Wall St pool estimates of $0.71 and $0.72 in the same period of 2024. The one-off decline to $0.55 in the Christmas quarter looks to have been overcome. The Coca-Cola's average selling prices are 5% higher while volumes in units increased by 2% QoQ on annual basis. Timely refreshed and higher price tags allowed Coca-Cola to earn more, despite the fact that its quarterly revenue fell marginally from $11.1 billion a year ago and $11.5 billion in Q4 2024 to $11.14 billion, which was in line with analyst expectations.

Of course, The Coca-Cola's operation is partially subject to global trade dynamics which "may impact certain components of the company’s cost structure across its markets," its CEOs admitted in a statement, adding that they expect the impact "to be manageable", as its supply chains are "primarily local". Pushing up costs, therefore, is not critical for its major business now, and it maintained all previously announced numbers for the full-year organic revenue and profit forecasts. Meanwhile, its rival PepsiCo (PEP) last week mentioned "subdued consumer spending", but Coca-Cola managed even to increase sales in highly inflationary markets such as Latin America.

Nothing noteworthy happened to the market price of Coca-Cola immediately after the earnings release, but it rose about 1.5% before the opening bell on April 29, offsetting a roughly equal-size decline on concerns over the previous couple of days. The proximity to its fresh all-time high just below $75 per share (detected on April 22) looks fully justified, while the price has never fallen below $60 this year, compared to its $51.55 low in 2023. The price range between $70 and $75 could be considered as a base case scenario before the next bullish attack, with $77 or even $80 as the next intermediate-term target. This asset is one of the best defensive equities among consumer stocks, perhaps along with Walmart (WMT). But we still feel a bigger potential in the latter one.