KFC plans to start serving Coca-Cola (NYSE:KO) drinks at its U.S. restaurants in January, replacing PepsiCo, The Wall Street Journal reported last week.
But the bigger story is what Coca-Cola already does with the customers it has. Last quarter, selling more drinks added more to growth than higher prices did, and the stock now trades above the multiple it has averaged over five years. The question is whether that volume growth can support the price.
Coca-Cola sells drink concentrate to bottling partners, who turn it into the Coke, Sprite, Dasani and Powerade that stores and restaurants carry around the world. Its edge shows in market share: it gained value share in ready-to-drink beverages in both of the first two quarters of fiscal 2026. The company is one of the 10 No-Brainer Stocks to Buy Now.
nik-albert-pGQpBcylvOA-unsplash
Coke Is Selling More Drinks
In the second quarter, global unit case volume grew 5%, ahead of the 2% that came from pricing and product mix. That is a sharp turn from the third quarter of last year, when volume grew just 1%. If you’re interested in faster-growing consumer companies, we recently compiled a report on 10 Fastest Growing Consumer Stocks to Buy Now.
CEO Henrique Braun credited the quarter to staying close to what consumers and customers want. The wins were broad: Coca-Cola Zero Sugar volume grew strongly, and the company gained share in every region except Asia Pacific. Pricing and product mix there fell because of affordability moves, and the company lost share in India.
Profits Have Outpaced Sales
Over the past five years, sales grew about 7.9% a year, but over the past three they have grown about 4.1% a year. Handing bottling operations to partners trims reported sales, and the company expects deals to cut this year’s comparable revenue growth.
Earnings per share did better, growing about 11.1% a year over five years, helped by an operating margin that widened again in the second quarter. If you’re looking for reliable dividend payers, check out 10 Best Blue Chip Dividend Stocks to Buy Right Now.
Some of this year’s profit growth comes from currency, though. The company raised its outlook for comparable earnings per share growth to 9% to 10%, and about 3 points of that is a currency boost. Without currency and the effect of deals, it expects 7% to 8%.
Costa Coffee Has Fallen Short of Plans
One of Coca-Cola’s bets outside soda has not paid off. The company agreed to buy Costa Coffee in 2018, hoping to sell Costa machines and canned coffee through its bottling network, Bloomberg reported this week. The plan fell short. Coca-Cola tried to sell Costa late last year, but talks fell apart over price, and the finance chief said in February that the company would keep it. The company has since said it is not looking to sell.
Bloomberg described Costa as a small part of the business, so it doesn’t change the case for the drinks themselves. It does narrow where the growth has to come from: the core brands, not the side bets. That makes the volume numbers matter even more.
The Multiple Assumes Growth Keeps Going
Coca-Cola trades at 28.30 times estimated 2026 earnings, based on adjusted figures. That is about 19% above its five-year average of 23.84 and well above the sector median of 15.28. Analysts expect 2026 earnings per share to grow 10.13%, close to the company’s own outlook, which includes the currency boost. The company’s outlook also leaves out the cost of losing its ongoing tax dispute with the IRS.
If you own the shares, you’re paying for volume growth to stay strong and for currency help not to reverse. Investors who want more undervalued ideas can see our ranking of 10 Best Undervalued Stocks to Buy in October.
KFC’s switch shows Coca-Cola is still winning customers, but the stock needs more than wins at one restaurant chain. When the company reports third-quarter results next week, volume growth is the number to watch. If it holds near the second quarter’s pace, the premium has support. If it slips back toward last year’s 1%, the multiple has less to rest on.
While we acknowledge the risk and potential of KO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KO and that has 10,000% upside potential, check out our report about this cheapest AI stock.
READ NEXT: Nvidia (NVDA): Can Paid Software Make Its Earnings Less Dependent on Hardware Sales? and Verizon (VZ): Can Fixed Wireless Grow Without Squeezing Mobile Network Returns?
This article is originally published at Insider Monkey.
