We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Coca-Cola's Margins Soar: Can It Sustain the Efficiency Push?
Read MoreHide Full Article
Key Takeaways
KO posts a 120-bps y/y operating margin expansion in 3Q25 despite a slight gross margin dip.
Coca-Cola credits media productivity, supply-chain gains and tighter expenses for stronger margins.
Management sees refranchising and a potential 2026 currency tailwind supporting margin strength.
The Coca-Cola Company (KO - Free Report) delivered a notable margin performance in third-quarter 2025, underscoring the growing impacts of its multi-year productivity and efficiency initiatives. While the comparable gross margin dipped modestly by about 10 basis points (bps), the comparable operating margin expanded a strong 120 bps, reflecting tighter cost control, improved marketing efficiency and disciplined supply-chain management. This operating leverage helped drive a 6% rise in comparable earnings per share to 82 cents, even as a 6% currency headwind weighed on the results.
Management attributed the margin expansion to a balance of reinvestment and productivity. Coca-Cola continues to pour resources into marketing, digital transformation and innovation, but is simultaneously extracting efficiencies across cost of goods sold, advertising and SG&A. The company specifically cited gains from improved media productivity, supply-chain optimization and tighter expense discipline as key contributors to profitability. Free cash flow generation remained robust at $8.5 billion for the quarter (excluding fairlife-related payments), reinforcing the strength of the underlying margin structure.
Looking ahead, Coca-Cola sees further levers to support margins. The ongoing completion of its refranchising strategy, most notably in India and Africa, is expected to structurally lift the company’s margin profile over time. In addition, management expects a modest currency tailwind in 2026, which may offer incremental support to both earnings and margins if current rates hold.
However, sustainability is not without risks. Commodity cost inflation, volatile trade dynamics and the need to maintain pricing affordability in a pressured consumer environment may constrain future margin upside. Still, Coca-Cola’s ability to expand its operating margin in a complex macro backdrop highlights the durability of its efficiency push, and positions the company to keep converting revenue growth into higher-quality earnings.
Are Competitors PEP & MNST Also Holding Up Margins?
As Coca-Cola posts expanding margins, the spotlight now turns to whether rivals PepsiCo Inc. (PEP - Free Report) and Monster Beverage Corporation (MNST - Free Report) can defend profitability in an equally volatile cost environment.
PepsiCo’s margins showed improving momentum in third-quarter 2025, aided by aggressive cost optimization and productivity efforts. Management noted that core operating margins would have expanded in beverages, excluding higher supply chain and tariff-related costs, which created a three-percentage-point EPS headwind. With SKU reductions, automation and logistics efficiencies accelerating, PepsiCo’s margin resilience now hinges on sustaining cost discipline amid persistent input inflation.
Monster Beverage delivered strong margin expansion in third-quarter 2025, with the gross margin rising to 55.7% from 53.2% a year ago, driven by pricing actions, supply-chain optimization and favorable product mix. Operating income soared more than 40% year over year, signaling powerful operating leverage. While aluminum costs and promotions remain headwinds, Monster Beverage’s disciplined pricing and efficiency gains point to sustained margin strength.
The Zacks Rundown for Coca-Cola
KO shares have risen 4.5% in the past three months compared with the industry’s growth of 5.9%.
Image Source: Zacks Investment Research
From a valuation standpoint, Coca-Cola trades at a forward price-to-earnings ratio of 21.99X, significantly higher than the industry’s 18.16X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for KO’s 2025 and 2026 earnings implies year-over-year growth of 3.5% and 8%, respectively. Earnings estimates for 2025 and 2026 have been unchanged in the past 30 days.
Image: Bigstock
Coca-Cola's Margins Soar: Can It Sustain the Efficiency Push?
Key Takeaways
The Coca-Cola Company (KO - Free Report) delivered a notable margin performance in third-quarter 2025, underscoring the growing impacts of its multi-year productivity and efficiency initiatives. While the comparable gross margin dipped modestly by about 10 basis points (bps), the comparable operating margin expanded a strong 120 bps, reflecting tighter cost control, improved marketing efficiency and disciplined supply-chain management. This operating leverage helped drive a 6% rise in comparable earnings per share to 82 cents, even as a 6% currency headwind weighed on the results.
Management attributed the margin expansion to a balance of reinvestment and productivity. Coca-Cola continues to pour resources into marketing, digital transformation and innovation, but is simultaneously extracting efficiencies across cost of goods sold, advertising and SG&A. The company specifically cited gains from improved media productivity, supply-chain optimization and tighter expense discipline as key contributors to profitability. Free cash flow generation remained robust at $8.5 billion for the quarter (excluding fairlife-related payments), reinforcing the strength of the underlying margin structure.
Looking ahead, Coca-Cola sees further levers to support margins. The ongoing completion of its refranchising strategy, most notably in India and Africa, is expected to structurally lift the company’s margin profile over time. In addition, management expects a modest currency tailwind in 2026, which may offer incremental support to both earnings and margins if current rates hold.
However, sustainability is not without risks. Commodity cost inflation, volatile trade dynamics and the need to maintain pricing affordability in a pressured consumer environment may constrain future margin upside. Still, Coca-Cola’s ability to expand its operating margin in a complex macro backdrop highlights the durability of its efficiency push, and positions the company to keep converting revenue growth into higher-quality earnings.
Are Competitors PEP & MNST Also Holding Up Margins?
As Coca-Cola posts expanding margins, the spotlight now turns to whether rivals PepsiCo Inc. (PEP - Free Report) and Monster Beverage Corporation (MNST - Free Report) can defend profitability in an equally volatile cost environment.
PepsiCo’s margins showed improving momentum in third-quarter 2025, aided by aggressive cost optimization and productivity efforts. Management noted that core operating margins would have expanded in beverages, excluding higher supply chain and tariff-related costs, which created a three-percentage-point EPS headwind. With SKU reductions, automation and logistics efficiencies accelerating, PepsiCo’s margin resilience now hinges on sustaining cost discipline amid persistent input inflation.
Monster Beverage delivered strong margin expansion in third-quarter 2025, with the gross margin rising to 55.7% from 53.2% a year ago, driven by pricing actions, supply-chain optimization and favorable product mix. Operating income soared more than 40% year over year, signaling powerful operating leverage. While aluminum costs and promotions remain headwinds, Monster Beverage’s disciplined pricing and efficiency gains point to sustained margin strength.
The Zacks Rundown for Coca-Cola
KO shares have risen 4.5% in the past three months compared with the industry’s growth of 5.9%.
Image Source: Zacks Investment Research
From a valuation standpoint, Coca-Cola trades at a forward price-to-earnings ratio of 21.99X, significantly higher than the industry’s 18.16X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for KO’s 2025 and 2026 earnings implies year-over-year growth of 3.5% and 8%, respectively. Earnings estimates for 2025 and 2026 have been unchanged in the past 30 days.
Image Source: Zacks Investment Research
Coca-Cola currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.