Coca-Cola Tops EPS Forecast But Volume Weakness, Tariff Concerns Weigh on Stock

Key Takeaways:

• Coca-Cola beat Q2 EPS estimates ($0.87 vs. $0.83) but missed slightly on revenue ($12.5B vs. $12.54B).

• Global unit case volume declined 1%, with notable weakness in North America, Asia-Pacific, and Latin America.

• Management reiterated full-year revenue guidance and raised EPS growth to 3%, but currency headwinds and potential cost pressures from cane sugar and tariffs weighed on investor sentiment.

Coca-Cola delivered a mixed set of Q2 results Tuesday morning, beating on earnings but falling just short on revenue. The report highlighted the beverage giant's continued resilience in a challenging macro environment, with strong pricing and innovation offsetting some volume softness. However, shares slipped modestly—down about 1% in premarket trade—as investors digested declining global unit case volumes, mounting currency headwinds, and the possibility of increased input costs due to a potential shift away from high fructose corn syrup. Despite reaffirming organic revenue growth and boosting earnings guidance, the muted reaction suggests investors are concerned about near-term margin pressure and regulatory risks.

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On the headline numbers, Coca-Cola posted adjusted earnings of $0.87 per share, ahead of Wall Street’s $0.83 estimate. Revenue for the quarter came in at $12.5 billion, up 1% year-over-year but just shy of the $12.54 billion expected. Organic revenue, which excludes currency, structural changes, and M&A, rose 5% in line with company forecasts. Net income attributable to shareholders jumped to $3.81 billion from $2.41 billion a year earlier. While profits were solid, the report was undercut by a 1% drop in global unit case volume, with declines in three out of four major geographic segments.

The weakness in volumes was broad-based. Unit case volume declined 3% in Asia-Pacific, 2% in Latin America, and 1% in North America. Only the Europe, Middle East, and Africa region showed growth, with a 3% increase. Sparkling soft drinks fell 1% globally, and the juice, dairy, and plant-based category declined 4%. The water, sports, coffee, and tea segment was flat, with coffee strength offsetting weakness in sports beverages. Management attributed the soft volumes to inflationary pressure, recession fears, and the rising influence of GLP-1 weight-loss drugs that are dampening consumer demand for sugary drinks.

Looking ahead, Coca-Cola reiterated its FY25 organic revenue growth outlook of 5–6% and lifted its adjusted EPS growth target to 3%, the high end of its previous 2–3% range. Free cash flow is still expected to come in around $9.5 billion. However, the company warned of several headwinds, including a 1–2% currency drag on full-year comparable revenue and a 5% hit to comparable EPS. In Q3 specifically, management expects a 1% currency headwind to revenue and a 5–6% headwind to EPS.

One wildcard for the second half of the year is the Trump administration’s push to eliminate high fructose corn syrup from consumer products. While Coca-Cola has not confirmed a change, President Trump claimed the company agreed to reformulate its namesake soda using cane sugar. If true, the move could raise production costs due to steep tariffs on imported sugar and limited U.S. supply. Ingredient inflation and regulatory pressure, including proposed soda restrictions in food assistance programs, may add incremental risk to domestic operations, which account for 40% of the company’s sales.

Still, Coca-Cola’s diversified portfolio and global reach remain key strengths. The company leads in the low- and zero-calorie categories with Coke Zero and Diet Coke and continues to expand into adjacent beverage markets. Fairlife, its protein-rich milk brand, is a standout growth driver. CEO James Quincey noted that the company is navigating a "shifting external landscape" with strong execution and confidence in its long-term growth plan. While near-term pressure is real, Coca-Cola remains a defensive stalwart with strong pricing power and cash generation.

Despite the modest selloff, the stock has risen roughly 13% year-to-date and remains one of the more stable plays in the consumer staples sector. But with macro clouds gathering and margin questions looming, the next few quarters may require more than just a sugar rush to keep investors energized.