Coca-Cola (NYSE:) stock was trending higher after the beverage giant reported solid Q1 earnings that topped estimates.
Coca-Cola generated $11.1 billion in revenue in the quarter, down 2% year-over-year but in line with analysts’ expectations. Organic revenue growth, however, was up 6% year-over-year.
Net income increased 5% to $3.3 billion, or 73 cents per share. That was better than the 72 cents per share that analysts had estimated.
“Our performance this quarter once again demonstrates the effectiveness of our all-weather strategy,” Chairman and CEO James Quincey said. “Despite some pressure in key developed markets, the power of our global footprint allowed us to successfully navigate a complex external environment.”
Overall, unit case volume grew 2% in the quarter, led by increases in India, China, and Brazil. In North America, the unit case volume dropped 3%. The unit case volume is the number of units, or cases, that Coca-Cola ships to retailers.
The other key metric is price/mix, which indicates the pricing of the product. Overall, the price/mix was up 5% in the quarter across all regions and products. In North America, the pricing was up 8%, while it jumped 16% in Latin America.
Officials said the impact of inflation contributed less to the higher prices than the previous year, as inflation rates are lower. However, that could change in Q2.
“Manageable” Tariff Impact
In March, U.S. President Donald Trump imposed 25% tariffs on aluminum imported into the U.S. Will they affect Coca-Cola and other bottlers who use aluminum cans?
While the company’s operations are largely local, there could be some headwinds from the tariffs. Officials said they may impact “certain components of the company’s cost structure across its markets.” However, officials called the potential impact “manageable.”
On the earnings call, Coca-Cola Chief Financial Officer John Murphy said there are various ways to deal with any potential tariff impact.
“Based on what we know today, the dynamic tariff landscape could impact pockets of our system’s cost structure, as well as consumer sentiment in our markets,” Murphy said, reported the AP.
He added that the company has “numerous levers to help manage the impact.” Those may include changing aluminum suppliers or using more plastic or glass bottles, according to the AP.
Should You Buy Coca-Cola Stock?
For the full year, Coca-Cola affirmed its organic revenue growth projections of 5% to 6%. However, net revenue could see a 2% to 3% currency headwind.
It also targets comparable currency-neutral earnings growth of 7% to 9% and comparable EPS growth of 2% to 3%, versus $2.88 in 2024. The comparable EPS percentage growth is expected to include a 5% to 6% currency headwind.
Further, it anticipates free cash flow of approximately $9.5 billion.
Coca-Cola also boosted its dividend in Q1 to 51 cents per share, up from 48.5 cents. It marks the 62nd straight year of dividend raises. Coca-Cola is one of the best and most consistent dividend stocks you can buy, with a yield of 2.84%.
In fact, as a consumer staple with a titanium brand and a reliable dividend, Coca-Cola is a great stock for this type of uncertain market.
To show the impact of that dividend, Coca-Cola stock has an average annualized return of 5.9% over the past 10 years. But when you reinvest the dividend, that annualized return jumps to 9.2%.
This year, the stock price is up 16% YTD, and analysts have set a median price target of $78 per share, which would suggest another 8.5% growth this year.
The is a bit high at 29, so investors should be a bit cautious of that. But over the long run, Coca-Cola has been a solid, reliable performer with a great dividend. It may not be a bad option in a volatile and potentially slower growing economy, although maybe wait for valuation to dip a bit.