Coca-Cola Stock Could Be a No-Brainer Buy in May

Demitri Kalogeropoulos, The Motley Fool

Sun, May 4, 2025, 5:33 AM 4 min read

Key Points

Coca-Cola’s global sales volumes are rising despite economic headwinds in major markets.
Operating margin remains strong at about 30%, more than double PepsiCo’s.
The stock trades at under 30 times earnings, reflecting its stability in a volatile market environment.

It's a stock that every investor knows, but that not enough consider as a core, long-term investment. Coca-Cola (NYSE: KO), the beverage titan, has a habit of outperforming its industry thanks to entrenched competitive advantages like brand strength, marketing prowess, and an unparalleled global distribution system.

These factors contributed to another quarter of superb results for Coca-Cola, which reported its first-quarter operating results in late April. Let's look at why that update could make the company a no-brainer buy right now.

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Doing more with less

It was a tough period to do business in many parts of the world. Demand for Coke products was weak in major markets like the U.S. and Latin America, in fact. Yet its global system still produced sparkling results. Sales volumes rose 2% overall, and organic revenue was up 6%. These metrics kept Coke chugging along at management's long-term goals for the business, despite slowing economic growth rates and geopolitical volatility.

The business even expanded its market share across the massive ready-to-drink beverage industry. "Our performance this quarter once again demonstrates the effectiveness of our all-weather strategy," CEO James Quincey said in a press release. That stability is an asset for investors in most markets, but especially during the current volatility spike on Wall Street.

Financial updates

Coke turned in a stellar performance on the financial side of the ledger as well. Cash flow was up year over year, profit margin expanded, and earnings per share rose 1% despite a five-percentage-point headwind from currency exchange rate shifts. Coke's operating profitability is sitting at 30% of sales, or more than double the level of arch rival PepsiCo's (NASDAQ: PEP).

KO Operating Margin (TTM) Chart — KO Operating Margin (TTM) data by YCharts.

These cash resources allowed management to invest in growth initiatives like launching brands in hit niches such as energy drinks, health drinks, and sparkling waters. People are loving the expansion of the Simply brand franchise to include soda beverages, and the popular Fuze Tea franchise entered more markets in Q1. There are now over 30 billion-dollar brands under the Coke umbrella.

Those successes explain why Quincey and his team see plenty of room to grow the worldwide business over the long term.

Looking ahead

That growth begins in 2025, which is still on track to meet management's targets despite the soft start in a few key markets. Coke should boost organic sales by 5% to 6% with earnings per share (affected by unfavorable currency exchange rate shifts) rising 2% to 3%. Toss in a dividend that's yielding nearly 3% (and has risen for over 60 consecutive years), and you've got the ingredients for modest, but significant, positive returns in 2025.

Investors can indeed find faster sales and earnings growth in other industries. And Coke's core soda business is under pressure that will likely take time to ease. However, the stock still provides a tantalizing mix of stable sales growth, profit expansion, and relatively low risk of a sharp contraction during the next recession.

Meanwhile, you can own the stock for just under 30 times earnings and below 6 times annual sales. Those valuation metrics don't represent obvious steals, in part because investors are already warming up to Coke's strengths in this volatile global economic environment.

But the stock will still make a good addition to your portfolio if you're looking for dividend income and sales growth in a defensive package. Consider putting this beverage leader on your watchlist, if not in your portfolio, for May.

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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Coca-Cola Stock Could Be a No-Brainer Buy in May was originally published by The Motley Fool

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