Coca-Cola Earnings Beat Estimates. Why the Stock Is Falling Anyway.

Coca-Cola faces a challenging consumer environment as Americans continue to pull back on spending. (Brandon Bell/Getty Images)

Shares of Coca-Cola declined on Tuesday after the soda maker posted a mixed second-quarter print.

Adjusted earnings of 87 cents a share topped analysts’ estimates of 83 cents. However, revenue of $12.5 billion narrowly missed the $12.6 billion Wall Street had forecast.

In afternoon trading, Coca-Cola stock was down 0.8%.

While organic net revenue grew 5% from a year ago, the move was driven by higher prices of the products. Coca-Cola’s unit case volume fell in most regions during the quarter, except for a 3% growth in Europe, the Middle East and Africa.

Consumer preference is clear: While global volume for trademark Coca-Cola declined 1%, Coca-Cola Zero Sugar grew 14%, driven by growth across all geographies.

The company increased its full-year guidance. Management now anticipates adjusted earnings to grow 3% from the $2.88 a share reported in 2024—the upper end of the previously guided range of 2% to 3%.

A weakening dollar has boosted Coca-Cola’s outlook, since it means higher overseas revenue when translated to the greenback. The dollar index, which tracks the dollar’s performance against a basket of other currencies, is down 10% in 2025, and in June marked the worst first half of a year since 1973.

Still, despite recent comebacks, foreign currencies are weaker compared to a year ago. Coca-Cola said it expects foreign currency to pose a 1% to 2% headwind to comparable net revenue, in addition to a roughly 1% headwind from acquisitions, divestitures, and structural changes. An earlier outlook called for a 2% to 3% headwind from foreign currencies.

Like many companies, Coca-Cola is facing a challenging consumer environment as Americans pull back from spending because of inflation pressure and recession fears. The adoption of GLP-1 weight-loss drugs had further suppressed consumers’ appetite for sugary drinks.

Meanwhile, the soda industry is facing rising regulatory risks from the Trump’ administration’s Make America Healthy Again movement led by Health Secretary Robert F. Kennedy Jr.

Kennedy, who blames soda for the obesity and diabetes epidemic in the U.S., has asked a dozen of states to prohibit soda purchases in the food-stamp program. Some of those requests were already approved by the U.S. Department of Agriculture. This could shave Coca-Cola’s U.S. sales, but the damage should be limited given the company’s size.

Despite souring consumer sentiment and regulatory pressures, Coca-Cola appears better positioned than some of its food and beverage peers thanks to its diversified products and geographic reach, which make it less exposed to the U.S. market’s weakness.

Operations in the U.S. compose 40% of the company’s total revenue. Coca-Cola’s strong presence in emerging markets could offer big tailwinds, wrote Edward Jones analyst Brittany Quatrochi in a Tuesday note. “As people in emerging markets enter the middle class, they often spend more on packaged beverages,” she said.

The beverage giant’s portfolio can also help it cushion some headwinds. The company dominates the low- and zero-calorie soda market with Diet Coke and Coke Zero. It also sells other beverages like juice, milk, coffee, and tea. Fairlife, a protein-rich milk brand it acquired in 2020, has been a strong growth engine.

“We think [Coca-Cola] is doing a good job reinvigorating its core carbonated soda business with new sugar-free offerings and smaller can sizes,” wrote Quatrochi, calling Coca-Cola a “highly innovative company” that she said is also improving and expanding its offerings in energy and sports drinks.

As more consumers prefer natural ingredients over highly-processed ones, Coca-Cola also announced on Tuesday the plans to expand its product range in the fall to include an offering sweetened with cane sugar for the U.S. market in place of high-fructose corn syrup.

“We are definitely looking to use the whole toolbox of available sweetening options to some extent where there are consumer preferences,” said CEO James Quincey on the earnings call. “It takes a long time to build a new franchise with consumers, but you’ve got to try things.”

While global trade dynamics, including tariffs, could impact Coca-Cola’s cost structure, management said the uncertainty should be “manageable” during an update in April.

Coca-Cola is targeting 4% to 6% sales growth longer-term. “We continue to execute with a clear intent on our priorities and are confident in our trajectory to deliver on our updated 2025 guidance and longer-term objectives,” Quincey added.

Write to Evie Liu at evie.liu@barrons.com and Mackenzie Tatananni at mackenzie.tatananni@barrons.com