KO breaks above the 200-day MA as results top expectations

Coca-Cola reported strong fourth-quarter results, beating expectations on both earnings per share and revenue, which has propelled the stock higher in premarket trading. The company posted adjusted earnings of 55 cents per share, surpassing the consensus estimate of 52 cents. Revenue came in at $11.5 billion, well ahead of the expected $10.7 billion, representing a 6% year-over-year increase. A key highlight of the report was the return to positive volume growth, with unit case volume increasing 2% after a decline in the previous quarter. This combination of pricing strength and improving demand reassured investors, leading to a 4% gain in Coca-Cola shares as they broke above their 200-day moving average at $65.38, reaching the highest level since November 2024.

A closer look at Coca-Cola’s performance shows that organic revenue grew 14% in the quarter, driven by a 9% increase in price/mix and a 5% rise in concentrate sales. The company has successfully leveraged pricing to offset inflationary pressures while maintaining steady demand, a contrast to its rival PepsiCo, which has seen greater volume declines. Notably, Coca-Cola Zero Sugar continued to outperform, with volume up 13%, contributing to a 2% growth in the sparkling soft drinks category. The water, sports, coffee, and tea segment also posted a 2% increase, with gains in bottled water and tea outweighing declines in sports drinks and coffee. However, the juice, dairy, and plant-based beverage division saw a 1% volume decline, largely due to weaker sales in Europe, the Middle East, and Africa.

Looking ahead to 2025, Coca-Cola issued guidance calling for organic revenue growth of 5% to 6%, a noticeable slowdown from the 12% reported in 2024. The company expects adjusted earnings per share to grow by 2% to 3%, with currency headwinds expected to be a significant drag on profitability. Foreign exchange fluctuations have already impacted Coca-Cola’s bottom line, with a 6% to 7% currency headwind factored into its EPS outlook for the year. Management also warned of ongoing geopolitical and macroeconomic uncertainties, including the potential for new trade policies and tariffs that could impact the business. While no specific details were provided on how the newly announced steel and aluminum tariffs might affect operations, executives acknowledged that changes in trade policy could introduce further pricing pressures.

From a financial standpoint, Coca-Cola continues to generate strong cash flow, though certain one-time items have distorted the year-over-year comparisons. Free cash flow came in at $4.7 billion for the full year, down 51%, but when adjusting for a $6 billion IRS tax litigation deposit, free cash flow excluding that item was up 11% to $10.8 billion. Operating margins were also a key focus, expanding to 23.5% in the quarter compared to 21.0% in the prior year. The combination of pricing actions and operational efficiencies helped offset higher input costs, though management acknowledged that inflationary pressures and currency fluctuations remain headwinds for 2025.

The market's reaction to Coca-Cola's earnings has been decisively positive, with the stock breaking out of a multi-month range. The 4% premarket move above the 200-day moving average at $65.38 is significant from a technical standpoint, signaling renewed investor confidence. If the stock holds above this level, it could act as a support zone and set the stage for a further rally. However, continued macro uncertainty, including the strong U.S. dollar and potential trade disruptions, could keep a lid on further upside in the near term.

Overall, Coca-Cola delivered a strong quarter, demonstrating pricing power, recovering volume trends, and solid profitability. While 2025 guidance reflects a more measured outlook, the company remains well-positioned within the global beverage market. The stock’s strong technical breakout suggests investors are willing to look past near-term currency and macro risks, focusing instead on Coca-Cola’s ability to execute in a challenging environment.