Coca-Cola (KO 1.37%) has been having a banner year. It became the go-to stock when tariff changes were announced and has been demonstrating resilience under pressure.
Considering the company's recent outperformance and ubiquitous global presence, you could be forgiven for thinking that Coca-Cola typically beats the markets. However, you'd be mistaken. With some exceptions over the past three decades, Coca-Cola stock has been a market underperformer and lagged the S&P 500 (^GSPC +1.02%) significantly over the past five years, inclusive of its strong run this year.
KO Total Return Level data by YCharts.
Let's take a look at what's happening with the company and whether it can keep up its current run or fall back to being a laggard over the next five years.
Have you had a Coke today?
Coca-Cola has been around for over a century, and its stability and global presence are two of the reasons it's one of Warren Buffett's favorite stocks. It's the largest beverage company in the world, with nearly $47 billion in trailing-12-month sales, and 6 in 100 shopping baskets worldwide contain a Coca-Cola product.
As large and popular as it is, it's been through some rough times, and sales were plummeting a few years ago. It's been back in growth mode for a few years already and recently surpassed its previous sales records.
Image source: Getty Images.
Coca-Cola stock is popular today for a few reasons, starting with its resilience under pressure. In the 2025 first quarter, net revenue declined 2% from last year, but organic revenue, one of its preferred top-line metrics, increased 6%. (Organic revenue adjusts for acquisitions, currency changes, and other factors, which is why it may be a more accurate picture of the business.)
Comparable operating margin expanded from 32.4% to 33.8%. These are strong numbers in a challenging environment.
In general, when there's economic pressure, Coca-Cola stock tends to outperform. It's considered a "safe stock" because investors know that no matter what happens on the economic world stage, Coca-Cola is likely to be able to withstand challenges. The market has also been enthusiastic about the company's strong response to tariff changes since much of its production is local, and it makes its concentrate for U.S. products domestically.
NYSE: KO
Key Data Points
There may be further pressure coming up that could impact the company negatively. Coca-Cola been able to successfully raise some prices to combat increasing costs, but there's a ceiling on that in the near term.
However, long term, the company should be able to continue climbing. The likelihood is that inflation moderates, interest rates go down, and people begin to spend more, increasing the chances that Coca-Cola can grow over the next five years.
Management's long-term outlook includes 4% to 6% organic revenue growth and 6% to 8% growth in organic operating income.
More beverages, brands, and scale
To accomplish this, the company has a model of acquiring other brands and launching new products, all funded by high sales from its reliable core brands. Some of its more recent acquisitions include Costa coffee and Fairlife dairy products. The company says that acquired brands have contributed 25% of its earnings-per-share (EPS) growth since 2016.
Management says it has 14% of the market share for commercial beverages in developed countries, which is quite impressive for one company in any industry, but it also leaves another 86% available for capture. In developing countries, which it says is 80% of the world's population, it only has 7% of the market. It notes that 70% of the world's population doesn't consume any commercial beverages at all, providing it with considerable market-expansion opportunities as it introduces its brands to new markets.
The storied dividend
The company has a strict focus on profitability and cash creation, and management feels that its "scarcity mindset" promotes creativity and a lean organization. The huge cash reserves allow it to invest in improving its drinks and developing new ones while raising the dividend and creating shareholder value.
Coca-Cola is the classic Dividend King and has raised its dividend annually for the past 63 years, a track record few other companies can match. It should be able to keep that up for the next five years and the foreseeable future.
Can Coca-Cola continue beating the market? The gap is already narrowing as the S&P 500 climbs and investors are ready to move out of safe stocks. However, Coca-Cola is in a much better position than it was a few years ago.
I wouldn't buy Coca-Cola stock with the expectation that it will beat the market over the next five years, although that's certainly a possibility. However, it offers value in its safety and dividend, and almost every investor needs some of that in their portfolio.
