Coca-Cola Can Draw Minor Benefits from Prolonged Economic Uncertainty

FY Guidance Expected To Satisfy But Trump's Arrival Raises Risks

• The revenue slowdown in Q3 has been driven by inflation, as the firm hiked prices every quarter since the end of 2020. Although unit case volumes fell 1%, the firm has seen a spike in demand for Coca-Cola Zero, partially alleviating the problem. Despite the situation, the management expects FY organic revenue growth of around 10%, at the higher end of guidance.
• Trump's nomination of Robert F. Kennedy, Jr. as the head of the Department of Health and Human Services poses risks for soft drinks and other sectors. The proposed update on the FDA's regulation on generally recognized-as-safe food additives could force KO and other companies to change their recipes, potentially raising their production costs.
• The strong US dollar also poses a short-term risk, as currency-related costs could pose an additional drag due to the company’s high reliance on foreign markets.

Scaling Back On Sustainability Goals Could Hurt The Image

• KO has long been criticized as one of the world's top producers of plastic pollutants. Minderoo Foundation reported the world is using more single-use plastic than ever, generating as much as 139 million metric tons in 2021. KO previously set a goal of using 50% recycled material in its packaging by 2035.
• However, recently, management changed these goals, lowering the bar to 35-40%, which immediately drew criticism from environmentalists. Oceana Group called the company short-sighted and irresponsible. Another organization, Break Free from Plastic, accused KO of greenwashing. They named KO the world's top plastic polluter for the sixth consecutive year in 2023.

KO has performed relatively well in line with expectations. Net margin remained in the low to mid-20, with PE ratio oscillating around the same. A sole thing to note is a slight increase in debt.

 I believe the firm is fairly valued at the moment, and I am leaving my thesis unchanged.