Coca-Cola beats third-quarter expectations on volume, raises full-year guidance as next year's growth faces constraints

What drove the third-quarter beat?

Coca-Cola's third-quarter organic revenue rose 7% year on year, above Goldman Sachs' forecast of 4.3% and the market consensus of 4.4%; the prior-year comparison had already risen 6%. Growth came mainly from volume: concentrate sales rose 7% and unit case volume increased 5%, exceeding Goldman Sachs' respective forecasts of 2.2% and 3.1%.
The company said shipment timing made concentrate sales growth about 2 percentage points higher than unit case volume growth. After its second-quarter results, the company had previously expected concentrate sales growth to lag unit case volume growth by about 1 percentage point. This change accounted for most of the revenue beat.
Price and mix contributed only 1% to year-on-year growth, below Goldman Sachs' and the market consensus forecast of 2.2%. Organic revenue in Latin America grew 16%, well above expectations; North America grew 3%, below Goldman Sachs' forecast of 5.2%, although the company said trends in the region improved month by month.

Revenue growth lifted the gross margin by about 1.7 percentage points year on year to 62.7%, above Goldman Sachs' and the market consensus forecast of 61.7%. The adjusted operating margin rose to 32.9%, up about 1 percentage point year on year; revenue growth and favorable currency effects offset some of the increase in marketing investment and operating expenses.
Third-quarter comparable earnings per share were 0.91 dollars, up 11% year on year and above Goldman Sachs' forecast of 0.89 dollars and the market consensus of 0.88 dollars. The company continued to invest in its brands, which Goldman Sachs believes will help support medium-term growth.

The company revised its 2026 organic revenue growth guidance from about 5% to at least about 5%; it raised its earnings per share growth guidance at constant currency, excluding acquisitions and divestitures, from 7%–8% to at least 9%.
The company expects full-year comparable earnings per share of at least 3.33 dollars, up from its previous range of 3.27–3.30 dollars; expected operating cash flow and free cash flow rose from about 14.6 billion and 12.4 billion dollars, respectively, to about 15.2 billion and 13 billion dollars.
Based on Goldman Sachs' assumption of 5.5% full-year organic revenue growth, fourth-quarter revenue would decline about 1% year on year, while reported earnings per share would grow at least about 1%; by comparison, revenue and earnings per share grew about 8% and 13%, respectively, in the first three quarters. Goldman Sachs believes this threshold is achievable, although the fourth quarter has 6 fewer days than the same period last year.
The company still expects full-year concentrate sales growth to be slightly below unit case volume growth, partly because channel inventories increased at the end of last year; the fourth quarter also faces a higher comparison base, as concentrate sales grew 4% in the same period last year.

The company preliminarily expects acquisitions and divestitures to reduce 2027 revenue and earnings per share growth by about 8 and 2 percentage points, respectively; the guidance assumes the sale of Coca-Cola's African bottling business in the fourth quarter of 2026. At current exchange rates and including hedge positions, the company also expects a slight currency headwind to revenue and profit next year.
Overall commodity cost pressures remain manageable, but logistics and transportation costs have risen. The company will also continue to promote affordable products to attract consumers while using categories and product mix to drive premiumization.
Goldman Sachs raised its 2026 earnings per share forecast by 0.04 dollars to 3.34 dollars, but lowered its 2027 forecast by 0.02 dollars to 3.49 dollars, implying year-on-year growth of about 4.4%, below the bank's forecast of 11.3% for 2026.

Goldman Sachs acknowledges Coca-Cola's revenue growth and execution but considers its valuation already high: the report says its forward price-to-earnings ratio carries a 45% premium to the market, above the 10% average over the past three years.
Goldman Sachs maintained its Neutral rating and raised its 12-month price target from 86 dollars to 88 dollars, still below the 92.70-dollar share price listed in the report, a gap of about 5.1%.