Coca-Cola's Pre-Q4 Earnings Highlight Valuation Concerns Amid Price-Led Growth

What happened

A Zacks article previewing Coca-Cola's Q4 2025 earnings anticipates year-over-year revenue and EPS growth, driven by strong pricing power and brand strength. However, it flags elevated valuation as a cloud over the buying case, aligning with the DeepValue report's assessment that KO trades at a premium. The report reveals KO's heavy dependence on price/mix, with Q3 2025 organic revenue up 6% but volumes flat and declining 1% in North America and Latin America. Critical risks include ongoing IRS tax litigation, FX headwinds reducing operating income, and the need for a shift to volume-led growth to sustain mid-single-digit targets. Consequently, the investment thesis remains a 'WAIT' with better risk/reward near $65 or upon evidence of balanced growth.

Implication

KO's price of $71.87 reflects a premium valuation that assumes sustained mid-single-digit growth, but this relies heavily on pricing amid soft volumes. The unresolved IRS litigation and FX pressures add material downside risk, limiting multiple expansion. Without volume improvement, organic growth could decelerate as pricing normalizes, threatening earnings stability. Therefore, capital is better held back for entry near $65 or after Q4 results show progress on volume targets. Close monitoring of emerging-market trends and tax litigation updates is essential for timing any investment.

Thesis delta

The new article reinforces the existing thesis that KO's valuation is elevated given its price-dependent growth and volume challenges. No shift is warranted; investors should maintain a 'WAIT' stance until either the price declines to $65 or operational metrics demonstrate volume-led growth.