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Almost two months into 2025, the S&P 500 (SNPINDEX: ^GSPC) is holding on to its gains from last year, but the index hasn't moved much higher; it's up just 4% so far this year. Valuations are higher than average, and that could signal some necessity for a correction.
But many companies are reporting solid performance, like Coca-Cola (NYSE: KO). After struggling with high inflation and higher costs, it demonstrated strong results in the 2024 fourth quarter. Here are three reasons to buy it right now.
1. Coca-Cola has pricing power
Coca-Cola is the largest beverage company in the world, and fans drink its popular products in 200 countries. Its namesake brand is one of the most recognized in the world, and people who love it are willing to pay a premium for it. That's called pricing power.
There's been some struggle as inflation makes everything more expensive, and Coca-Cola has had to balance absorbing and passing along higher costs. It has experimented with several ways to do this, with concepts including smaller packages and returnable glass bottles.
The glass bottle initiative has become an important effort in recruiting new customers to its brand, keeping costs lower while maintaining premium packaging.
Revenue increased 6% in the fourth quarter year over year and 3% for the full year, even though unit case volume increased 2% and 1% respectively. Organic revenue, which leaves out factors like acquisitions and foreign exchange, was up 14% for the quarter and 12% for the year.
Price/mix, which tracks how much growth came from pricing, was up 9% year over year in the quarter, with 8 percentage points coming from pricing action. Management sees that trend continuing into 2025, with pricing adding more to revenue than in a regular year, but ultimately moderating as inflation does.
2. It's incredibly profitable
Coca-Cola has been at this for more than a century -- it's been around since 1886. It has a well-established formula for creating and marketing beverages and turning sales into profits.
For example, part of this strategy is acquiring new brands that already have a following, and as it integrates the brand into its distribution system, it can sell it to more people more efficiently.
Pricing power becomes even more important when there's inflationary pressure, and pricing actions do more than increase sales. Successful price increases that don't curb demand allow the company to cover increasing costs while still making a profit. Earnings per share (EPS) increased 12% year over year in the fourth quarter to $0.51, and for the full year, they declined slightly to $2.46.