It's that time of the year: earnings season. And investors are paying extra close attention to the companies that they own or that are on their watch lists.
Coca-Cola (KO +0.32%) is set to reveal financial results for its fiscal 2026 second quarter on July 28. Should you buy this beverage stock, which is up 18% this year, before then?
Image source: The Motley Fool.
No surprises here
When Coca-Cola reported its Q1 numbers in late April, for the period ended April 3, management laid out full-year guidance. At that time, it expected organic revenue growth of 4% to 5% and an adjusted earnings-per-share (EPS) gain of 8% to 9%. Should this outlook be upgraded, then investors will have a clear sense of how optimistic the leadership team is. On the other hand, a downgraded forecast indicates difficult times ahead.
Consensus analyst estimates call for sales to rise 4% year over year in the second quarter. EPS is projected to increase 7%. It's worth pointing out that Coca-Cola exceeded Wall Street's top- and bottom-line forecasts in Q1 of this year.
Coca-Cola is such a steady and predictable business, however, that investors shouldn't expect any surprises. This is still an extremely profitable enterprise. Coca-Cola has reported an average operating margin of 26.3% over the past five years. This allows the company to rake in huge amounts of free cash flow.
Therefore, it's unnecessary to make an investing decision ahead of the upcoming financial release. It's almost a virtual certainty that the fundamentals aren't going to change at all.
The better question to ponder is whether you want to own this business for the long term. At a price-to-earnings ratio of 26, shares aren't cheap. And based on the historical track record, Coca-Cola isn't going to outperform the market.
NYSE: KO
Key Data Points
Focus on the most important attributes
When companies report earnings, investors receive the most up-to-date information on their holdings. While this data is certainly important, as it can reinforce or challenge an investment thesis, it's always a great idea to maintain a long-term perspective. If you have a time horizon of five years or more, a single quarter's numbers are trivial in the big picture.
This is especially true for a business like Coca-Cola. Having been around for 140 years, this is arguably the most stable company on the face of the planet. It has staying power due to the minimal risk of obsolescence. Its brand has stood the test of time.
And most importantly, Coca-Cola continues to prioritize its dividend payout, which is key to the investment story. It has an incredible 64-year streak in place of hiking dividends. This makes the beverage stock a top choice among income investors.
