Earnings Call Insights: The Coca-Cola Company (KO) Q4 2025
Management View
- James Quincey, Chairman & CEO, opened with a reflection on his tenure, highlighting, “Looking back to CAGNY 2017, we set 4 strategic priorities: accelerating our consumer-centric brand portfolio, strengthening our system, digitizing the enterprise and unlocking the power of our people. And I think we’ve done a good job meeting those priorities.” Quincey emphasized adding $12 billion brands to the beverage portfolio, achieving a total of $32 billion brands, and noted, “After years of being stuck at around $2 comparable earnings per share, we inflected our earnings, overcame ongoing currency headwinds and have achieved a $3 comparable earnings per share in 2025.”
- Henrique Braun, EVP & Chief Operating Officer and CEO-elect, stated, “Despite a complex external environment in 2025, we delivered on our initial top line and bottom line guidance set last February. We also continued our streak of gaining value share for the last 19 quarters.” Braun highlighted broad-based growth in North America, new billion-dollar brands including Santa Clara in Mexico, and ongoing innovation such as Sprite Chill and Coca Holiday Creamy vanilla. He outlined future focus areas: recruiting young adult consumers, accelerating innovation, and putting digital at the core of consumer engagement.
- John Murphy, President & CFO, reported, “During the fourth quarter, we grew organic revenues 5%. Unit case growth was 1%. Concentrate sales grew 3 points ahead of unit cases, driven primarily by the timing of concentrate shipments and an extra day in the quarter.” Murphy added, “Fourth quarter comparable EPS of $0.58 was up 6% year-over-year despite 5% currency headwinds and an increase in our comparable effective tax rate.”
Outlook
- The company expects organic revenue growth of 4% to 5% for 2026, in line with its long-term growth algorithm. Murphy stated, “We also expect growth in comparable currency-neutral earnings per share, excluding acquisitions and divestitures of 5% to 6%.” Comparable EPS growth is guided at 7% to 8% versus $3 in 2025.
- Murphy noted, “We expect to generate approximately $12.2 billion of free cash flow in 2026 through approximately $14.4 billion in cash from operations, less approximately $2.2 billion in capital investments.”
- Divestitures, including the pending sale of Coca-Cola Beverages Africa, are expected to be a 4-point headwind to comparable net revenues and a 1 point headwind to comparable earnings per share.
Financial Results
- Organic revenues grew 5% in Q4 2025, with a 1% unit case growth and a 3-point outperformance in concentrate sales due to shipment timing and calendar effects.
- Price/mix growth was 1%, primarily from 4 points of pricing actions, offset by 3 points of unfavorable mix due to business and category composition and timing.
- Comparable gross margin and operating margin both increased approximately 50 basis points.
- Free cash flow, excluding the fairlife contingent consideration, was $11.4 billion in 2025, an increase of approximately $600 million over the prior year.
- Net debt leverage stood at 1.6x EBITDA, below the targeted range.
Q&A
- Dara Mohsenian, Morgan Stanley: Asked about the balance of price/mix and volume for 2026. Quincey responded, “What you see is 4% underlying price and 1% volume. So you see the fourth quarter in simple terms as a 5% revenue growth quarter, which is very much what we’ve been delivering through ’25 and back into the previous year.”
- Stephen Robert Powers, Deutsche Bank: Asked about macro environment assumptions for 2026 and emerging vs. developed market contributions. Quincey said, “We believe we will get back to a balance, so call it 50-50. What is important this year is to know that the places that need to get better are the contributors of long-term volume growth.”
- Lauren Lieberman, Barclays: Asked about North America margin sustainability. Murphy answered, “We have, I think, in the last 8 years have averaged about 60 basis points a year operating margin expansion. We have talked frequently about the fact that it’s not a fluke. There’s lots of levers that we have in the supply chain, marketing investment, how we run the business.”
- Christopher Carey, Wells Fargo: Inquired about challenging markets. Braun replied, “The all-weather strategy has been working for us because we leverage not only the ones that have the momentum to offset these other markets.”
- Multiple analysts asked about the impact of the Mexican tax and U.S. SNAP changes. Quincey stated, “Overall SNAP, I think, is going to end up being manageable… we see it as a manageable impact in the U.S. and overall globally.” Braun added, “Mexico will host the World Cup event… we are dialing up our campaigns there from day 1.”
Sentiment Analysis
- Analysts were generally positive but probed for details on guidance realism, macro headwinds, and regional risks, signaling cautious optimism and some skepticism on execution.
- Management maintained a confident tone in prepared remarks, with Braun emphasizing, “We have enduring strength, which includes an incredible foundation of $32 billion brands and unmatched system reach.”
- In the Q&A, management displayed measured optimism, often reiterating prudent assumptions and realistic targets, with Quincey noting, “We believe we have all the strategies and execution to drive top line growth well into the future.”
- Compared to the previous quarter, analyst tone remained measured with repeated focus on regional volatility, while management’s tone shifted from resilience to operational confidence and transition planning.
Quarter-over-Quarter Comparison
- The 2025 Q4 call marks a leadership transition, with Henrique Braun becoming CEO. Strategic focus shifted from completing refranchising to driving innovation, digital engagement, and youth market penetration.
- Guidance language for 2026 remains cautious but confident, with a slightly lower top-line growth range than the previous quarter’s 5% to 6% for 2025.
- Analysts’ focus moved from near-term volume recovery and refranchising impacts to structural profitability and sustained growth amid macro challenges.
- Key metric changes include an increase in comparable EPS guidance for 2026 and a highlighted 7% to 8% EPS growth target versus $3 in 2025.
- Management’s sentiment evolved from navigating headwinds to emphasizing foundational strength and future opportunities under new leadership.
Risks and Concerns
- Management cited headwinds from currency, commodity volatility, and a 2-point increase in the effective tax rate.
- The Mexican beverage tax was identified as an immediate headwind, with mitigation plans including value-pack offerings and targeted marketing around the World Cup.
- Divestitures are expected to weigh on revenue and EPS growth in 2026, notably from the pending sale of Coca-Cola Beverages Africa and the divestiture of Chi in Nigeria.
- The ongoing IRS dispute remains pending, with Murphy stating, “We’ll continue to judiciously manage our balance sheet as we await a court decision related to our ongoing dispute with the IRS.”
- Management acknowledged the need for continued innovation and faster speed to market to address competitive and consumer dynamics.
Final Takeaway
The Coca-Cola Company closed 2025 with strong brand growth, robust margin expansion, and a seamless transition to new leadership under Henrique Braun. The company outlined a disciplined 2026 outlook targeting 4% to 5% organic revenue growth and 7% to 8% comparable EPS growth, while preparing for headwinds from taxation, divestitures, and macroeconomic volatility. With a focus on digital engagement, innovation, and operational agility, management remains confident in capturing new growth opportunities and sustaining value creation for shareholders.