rewrite this title KO Q3 Preview: Can Coca-Cola tame margin pressures and sluggish volumes? | AlphaStreet

The Coca-Cola Company (NYSE: KO) experienced volume declines in some markets during the first half, though it remained broadly resilient to market challenges. Despite macro uncertainties and increased consumer caution, the soft drink giant maintained stable sales momentum in Europe, helped by effective marketing and new product launches. The company’s upcoming earnings report is expected to provide insights into evolving consumer spending trends and the broader demand scenario.

What to Expect

The Atlanta, Georgia-headquartered firm is expected to report its third-quarter FY25 earnings on Tuesday, October 21, at 6:55 am ET. On average, analysts following the company predict earnings of $0.78 per share for Q3, on a comparable basis, which is slightly higher than the $0.77/share it earned in the year-ago quarter. It is estimated that third-quarter revenues rose 4% annually to $12.42 billion.

Coca-Cola shares have dropped about 8% since hitting a record high in April this year. The last closing price is broadly in line with the stock’s 52-week average value of $67.91. The stock has largely moved sideways in recent weeks, and this trend is expected to persist ahead of the upcoming earnings release. Market watchers are bullish about KO’s prospects, and the majority of them recommend buying the stock. Having consistently increased its dividend for over six decades, Coca-Cola is a dividend king favored by income investors.

Financials

In the FY25 second quarter, earnings exceeded estimates, marking the sixth consecutive beat, while revenue fell short of expectations. Q2 revenues edged up 1% year-over-year to $12.5 billion, with organic sales growing 5%. Excluding special items, the company’s earnings moved up 4% YoY to $0.87 per share. On a reported basis, net income was $3.8 billion or $0.88 per share, up 58% from the prior-year quarter.

“We’re taking the appropriate actions to deliver on our updated 2025 guidance. Critically, to deliver amidst the current realities, we’re enhancing capabilities along each facet of our strategic growth flywheel by investing to drive transactions in the back half of the year. Our marketing transformation allows us to more quickly test ideas, share learnings, and scale successful campaigns. For example, to mitigate consumer pressure in mix stemming from geopolitical tensions, our teams implemented tactics similar to those developed last year in Turkey, tailored to local needs,” Coca-Cola’s CEO James Quincey said in the Q2 FY25 earnings call.

Outlook

A few weeks ago, the Coca-Cola leadership said it expects full-year 2025 organic revenue to grow 5-6% year-over-year, and comparable earnings to gain approximately 3%. Recently, consumer sentiment was dampened by economic uncertainties and political unrest in some regions, weighing on the demand for the company’s products. Meanwhile, data shows that volumes improved in the most recent quarter, signalling a potential recovery in the back half of the year. Notably, Coca-Cola has delivered stable growth in recent years, despite evolving consumer preferences and persistent inflationary pressures.

Coca-Cola shares have declined more than 5% in the past six months, underperforming the S&P 500 index. On Friday, the stock opened at $66.52 and traded slightly higher.