Coca-Cola (KO) shares are under pressure after the company’s earnings beat was overshadowed by declining volume as price increases take a toll on consumer demand. Citi US beverages and HPC lead analyst Filippo Falorni joins Seana Smith and Madison Mills on Catalysts to discuss Coca-Cola’s quarterly results and why he is bullish on the beverage company’s stock.

“Generally the quarter was extremely solid in the context of a global macro environment which has been very volatile,” Falorni tells Yahoo Finance, saying “Coca-Cola is a true multinational company, over 70% of sales outside of the US. And their ability to really grow organic sales, which is the metric that we track more closely at a 9% rate, I think is a confidence of extreme solidity in their results both from a price mix standpoint and also volumes.”

The analyst says “Volumes were down 1%. And that's what drove a little bit of the disappointment today in the quarter. Consensus was more expecting flattish volumes in this coming quarter.” He notes that factors like negative weather in India, weakness in the Mexico region, and continued pressure in China and the Middle East contributed to the declining sales volumes.

“Companies have been taking a lot of pricing in the CPG [consumer packaged goods] space over the last two years. The difference for Coca-Cola is a lot of it is also mix-driven,” the analyst says explaining that products like the Fairlife brand and higher-priced smaller cans have positively contributed to pricing.

Falorni says pricing will likely normalize, though the stock remains among his top picks. “Pricing has been very elevated over the last couple of years… Recently, they've been doing 10% plus on pricing. I think that's going to probably normalize more to the 3% to 4% range into next year.”

Coca-Cola “remains our top name because when I think about the long-term organic sales growth profile of this business, I do have a high confidence that it can continue to deliver at the high end of the long-term algorithm… And the valuation, to me, is pretty attractive. It trades only at 23 times on 2025 numbers. Most of the comparable companies in my space, they trade at at least 25 to 26 times. So it's trading at a discount. The fundamentals are solid, and I think they're going to continue to be solid into 2025.”

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This post was written by Naomi Buchanan